US market continued to harden in Q3 2020, led by umbrella and D&O

Third-quarter 2020 pricing increases in the US were more pronounced than in previous quarters, according to results from The Council of Insurance Agents & Brokers’ (CIAB) quarterly Commercial Property/Casualty Market Index. It reveals that the average increase in premium pricing was 11.7%, up from 10.8% in Q2 2020, representing the 12th consecutive quarter of premium increases. Prices continued to rise for all lines of business – including workers compensation – and the increase for select lines was significant. Umbrella had the highest average price increase, at 22.9%, up from 20% in Q2 2020. Directors and officers also recorded a significant average price increase of 16.1%, followed by commercial property with an increase of 14.2%. “Prices also continued to increase for workers compensation, with an average increase of 1.5%, signifying that the 21-quarter streak of price decreases for that line has indeed come to an end,” states the index. Large accounts saw the largest average increase in premium prices, at 15.3%, compared to 14.2% in Q2 and 12.6% in Q1 2020. Medium accounts also experienced notable increases, with an average increase of 12.7%, compared to 11% in Q2 and 9.8% in Q1 2020. Small accounts saw an average increase of 7.1%. “It’s clear the pandemic has accelerated the market conditions observed in previous quarters,” said Ken A Crerar, president/CEO, CIAB. “The financial stress from the extended economic contraction has contributed to increased premium pricing across the board, and heightened insurer wariness and reluctance to take on additional risk. It’s critical for brokers to act as trusted advisers for their clients and help them through this troubled time.” In terms of capacity, 90% of respondents reported carrier capacity for umbrella risk decreased in Q3 2020, while nearly 80% also said capacity for commercial property was cut substantially in Q3 2020. Respondents cited an already severe natural catastrophe season, characterised by out-of-control wildfires in California, a tornado outbreak in the doutheast, the August derecho in the midwest and major hurricanes, said the CIAB. The reduction in capacity was coupled with increased deductibles, reduced limits and more scrutiny from the carriers. According to the CIAB, respondents described significant loss control requirements in Q3 2020 and reported that carriers were asking for detailed financials and business income statements from the insureds. The index notes that the sharp increase in demand for lines such as business interruption, employment practices, D&O and all lines affected by the pandemic moderated somewhat in Q3, but demand for these lines still remained higher than normal. As for claims, the index states: “After the initial rush of business interruption claims – jumping from 18% in Q4 2019 to 75% in Q1 2020 and 94% in Q2 2020 – things seem to have waned somewhat in Q3. BI claims still remained higher than normal, with 62% of respondents noting an increase… Other lines that saw an outsized impact on number of claims due to the pandemic, though in the opposite direction, such as commercial auto or general liability, have also not yet returned to normal levels.” It adds: “The restrictions on public activities appear to have exerted downward pressure on claims numbers for commercial lines whose coverages are generally not triggered by pandemic exposures. However, the pandemic was not the only cause of claim activity. Several respondents noted increased commercial property claims, of which natural catastrophes were a significant driver.”

US market continued to harden in Q3 2020, led by umbrella and D&O

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