US insurers trying to keep rates in line with loss costs, says Gallagher

The US commercial market will be much like last year with the exception of property, according to Gallagher. US carriers will continue to focus on profitability and want to ensure they are getting adequate returns on the risks they are insuring, says Gallagher in its Fall/Winter Insurance Market Update. As a result, the broker expects US insurers will try to keep rates in line with increased loss costs, which many carriers are reporting to be in the mid-single digit range. Gallagher says 2023 will likely resemble 2022 in many ways with some notable exceptions, “namely property, as carriers continue to focus on valuation issues (including business income) on all risks, and we expect a deterioration in market conditions on CAT property”. On the property side, more favourable renewal terms exist for those with attractive risk profiles, which Gallagher says means no CAT property, up-to-date valuations, risk control programmes, and no loss history. “Before Hurricane Ian we were expecting price increases to moderate and see more stability in the property market. Capacity in coastal Florida, in particular, will likely be constrained. Those carriers that have been unsuccessful in securing meaningful rate increases and staving off ongoing large losses will continue to raise rates and premiums, and tighten terms and conditions, says the broker. For general liability, Gallagher expects rate increases to continue into 2023, albeit smaller increases than many of the other major lines of insurance. It says that inflation and third-party litigation will continue to drive up claim costs and prices, and notes that carriers are pushing for new mandatory exclusions for pollutant per- and polyfluoroalkyl substances. The workers’ compensation market is pushing for some rate increases as the state of the economy will likely affect workers’ compensation in additional ways, such as rising payroll costs due to wage inflation, the update says. It adds that commercial auto prices will continue to be driven up by labour shortages, inflation, third-party litigation and supply chain issues. Gallagher believes that clients may return to higher umbrella/excess limits as the market becomes more competitive at the higher layers. It explains that companies that historically had a $50m umbrella/excess policy spent that same money for $25m of coverage over the past few years. D&O is expected to see continued competition at all layers and across industries, given the abundance of capacity in the marketplace, says the broker, although inflation may increase premiums. But it notes that the future landscape for D&O claims remains a question, warning that economic stressors could lead to potential widespread loss of shareholder value and ensuing regulatory changes, which in turn, could lead to more security claims in 2023. Finally, on cyber, where there is a continued strain on capacity as demand for limits generally outweighs supply, Gallagher says: “Underwriters are looking for verification of controls, and may move toward formal validation by an independent third party. This is driven, at least in part, by increasingly complex and ambiguous underwriting questions that applicants must now answer as part of the application process.”

US insurers trying to keep rates in line with loss costs, says Gallagher

Broker expects deterioration in market conditions on CAT property

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