Some rates will stabilise in US but bad risks face hikes

While rates are stabilising for some P&C buyers in the US, organisations with less favourable risk profiles or challenging loss exposures will continue to see rate increases this year, USI Insurance Services says in a new report.

Hurricane Ian losses, other severe weather events and various factors including supply chain challenges and inflationary pressures will impact insurance market capacity, available coverage and premium costs, USI warns.

Both US catastrophe-exposed and non-catastrophe-exposed property with poor loss history or poor risk quality will continue to see rate increases between 25% and 150% in the first half of 2023, unchanged from the end of 2022, it adds.

Optimal property risks will see rates up 5% to 10% by comparison, while less favourable risks will have to deal with rises of between 15% and 50%, also unchanged from the end of 2022, USI says in its 2023 Commercial Property and Casualty Outlook.

Cyber rates are forecast to jump by 100% or more for less optimal risks, though more normalised rate changes and overall capacity growth are expected for more optimal risks, according to USI.

“All organisations, regardless of industry or the location of their operations, will be expected to continue to improve their cyber hygiene” and have strong risk controls, it continues.

The threat of Russian-backed or supported cyberattacks and counterattacks intended to disrupt supply chains, critical infrastructure and institutions will continue to weigh on insurers, USI notes.

For casualty risks, a more competitive rate environment is expected for general liability and products liability, with average rate increases in the 5% to 10% range, compared with 10% to 15% in 2022.

A growing number of US liability insurance buyers will experience flat to 5% increases as the year progresses and they assume more risk through higher deductibles or self-insured retentions, and more insurers achieve rate adequacy, USI predicts.

However, umbrella/excess coverages continue to be volatile, with most insurers employing continued underwriting discipline. The pace of rate deceleration “remains stubbornly tepid, as competition for new business has been much slower to materialise than we expected”, USI says in the report.

The overall public company D&O marketplace, which turned even further toward a true buyer’s market in the second half of 2022, should continue to soften, USI says. It forecasts overall flat to slight premium decreases for D&O liability placements for most insureds with no significant claims.

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