US casualty market more competitive, but property still challenging, says USI

Hurricane Ian shattered the hope for a swift return to a more stable insurance market environment in the US property market, according to USI Insurance Services. But the US broker expects a slightly more competitive casualty rate environment in 2023, albeit with prices still increasing. In its 2023 Commercial Property & Casualty Market Outlook, USI says challenges will continue in 2023 for risks with significant exposure to wildfire, named storm, convective storm and flood, while certain occupancies like food, habitational, wood products, recycling and frame builder’s risk projects will continue to face pressure to improve risk quality while experiencing rate increases, limited capacity and increased deductibles. Overall, insureds will continue to face difficult decisions on the property side, balancing risk tolerance, third-party insurance requirements and budgetary restrictions, it says. USI points to a number of trends in the property line, including increased deductibles and limitations for water damage, market scrutiny on all valuations, not just building valuations, and a tightening of the terrorism, sabotage and political violence market. General/products liability and umbrella/excess liability have seen consistent double-digit rate increases for the past five years, but USI says: “Underwriting discipline persists to the point where what was expected to be more aggressive competition for a broader array of accounts has not materialised as quickly as expected. Both social and economic inflationary factors have caused insurers to remain more conservative in their pricing models and prolong an environment of rate increases – albeit slowing for more insureds than not.” For general/products liability, the broker anticipates a slightly more competitive rate environment in 2023, with increases between 5% and 10%, and an expanding number of insureds experiencing flat to 5% increases as the year progresses. Umbrella/excess continues to be volatile from a rate perspective, says USI, with the majority of insurers employing continued underwriting discipline, although it adds that an increasing number of insurers are more willing to negotiate on price rather than walk away from what they believe are unprofitable accounts. The US cyber market is characterised by stabilising insurance rates, better understanding of cyber policy triggers by insureds, and the exclusion of war and terrorism coverage. Insurers are tightening the terms and availability of certain cyber coverages, especially for organisations that cannot demonstrate strong cyber risk controls and overall cyber hygiene, says USI. It is expecting “overall growth in available and deployed capacity, and more normalised rates changes for optimal (less hazardous and loss-free) risks – barring any material loss events, major changes in cyber reinsurance rates, material changes in global conflicts, systemic events, or major regulatory challenges”. For D&O, the picture is healthier for buyers, becoming a true buyer’s market. USI says a softening market should continue, but much of that depends on the extent of the economic slowdown and the pace of inflation, and any pronounced stock market correction and/or any increase in the frequency or severity of bankruptcies could firm the marketplace. Overall, it anticipates flat to slight premium decreases for D&O liability placements for most insureds with no significant claims. Workers’ compensation will continue to see a competitive premium environment, although in more challenging states there could be 5% to 10% increases depending on the state and classification of business. Workers’ compensation rate adequacy in 2023 will be challenged by rising medical costs, wage growth, an aging workforce, the transition back to an in-person work environment and job shifting. Finally, for commercial auto, fleets fewer than 200 will see primary auto liability premiums in the first half of 2023 to increase 10% to 15% year on year with a poor loss history and remain flat or increase 5% with a good loss history. For fleets in excess of 200, rates are expected to remain flat or increase between 0-5%, says USI. “Fleets with an adverse risk profile are still experiencing higher pricing, but can secure more favourable terms because of increased deductibles, self-insured retentions, and alternative programme structures,” explains the broker.

US casualty market more competitive, but property still challenging, says USI

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