\u201cThere is no shortage of challenges in the renewal process,\u201d says Hector Mastrapa, senior vice-president of risk management at Marriott International. And the Covid-19 pandemic didn\u2019t help make this year\u2019s renewal process any easier, he adds. <\/p>\n
\u201cClearly, for many insureds, their exposure base is very different than it was in the past,\u201d particularly, for many, in terms of revenue and payroll projections that were disrupted by the pandemic, Mastrapa says. \u201cThere is a fair amount of vagary around what those are going to be in the future,\u201d he adds, which makes rate-setting for coverages that consider those factors challenging.<\/p>\n
Buyers who have invested in relationships with insurers will find it pays off in fair outcomes for both sides when discussing the reshaped exposure base and other renewal issues, Mastrapa says. \u201cIt\u2019s been a challenge to renew in a virtual environment,\u201d he adds, and knowing each other well has helped the process of working with insurers from a distance.<\/p>\n
\u201cThose relationships are helping convince underwriters to stay on an account or come on at lower attachment points,\u201d says Adam Mazan, vice-president, Pacific region at Risk Placement Services. \u201cBut they are not necessarily helping to change or dictate pricing and\/or terms in a broad sense.\u201d<\/p>\n
Capacity returns to excess liability market
\nSolid relationships can\u2019t hurt when putting together umbrella and excess liability towers, which sources say continue to be expensive for large risks and those that are considered difficult.<\/p>\n
\u201cWe\u2019re seeing a bifurcated market right now,\u201d for umbrella and excess coverage, says Mazan. Accounts considered low to medium hazard are seeing \u201csingle-digit to low double-digit rate increases on renewals\u201d, he explains, adding: \u201cThere is a lot of insurer interest in coming onto those accounts and it\u2019s relatively easy to get placements put together.\u201d<\/p>\n
For higher-hazard accounts and those with revenue of about $1bn or more, the picture changes, Mazan says, and rate increases are ranging up to about 20% for those accounts.<\/p>\n
Marriott was able to complete its international casualty renewals in October after replacing a few insurers that left its excess tower programme with new entrants and additional capacity from incumbent insurers, according to Mastrapa. \u201cWe were satisfied, given the current hard market environment,\u201d he says.<\/p>\n
Capacity for umbrella and excess liability risks is returning to the market after plunging from more than $2.2bn for any single account in 2018 to about $625m in the third quarter of last year, says Jon Drummond, head of broking, North America, at Willis Towers Watson (WTW). Existing insurers are now putting up additional capacity and there are new entrants into the marketplace, all of which added about $350m in capacity in 2021, he says. <\/p>\n
For many coverage lines, increases in rates are slowing, sources note. And, in some cases, risk managers may see noticeable reductions next year.<\/p>\n
\u201cIf the trends continue as they have in 2021, we would expect that as we move into 2022, we\u2019ll see continued moderation in the marketplace and certain lines of business could even move into a soft state,\u201d says Drummond.<\/p>\n
\u201cThe general feeling is that the market is healthier than it has been in the past, but there is still work to be done,\u201d says Sam Baig, executive vice-president with Amwins Group. Many of the conditions that drive high prices \u2013 social inflation, nuclear verdicts, climate risks and cybercrime among them \u2013 haven\u2019t gone away, he says. \u201cCarriers have paid bad losses across all industry segments and lines of business, and there\u2019s still uncertainty around Covid, too, and how those losses are going to develop.\u201d<\/p>\n
In many cases, \u201ccarriers are managing their portfolios with either a change in terms and conditions or a reduction in exposure by shedding limits\u201d, Baig says. \u201cRegardless of the line of business, it takes more carriers to build the same tower of coverage that you had before, and when you add up all the pieces it becomes quite expensive.\u201d<\/p>\n
D&O rates ease<\/strong> Prices for the coverage during the current renewal have been \u201cflat to modest single-digit increases\u201d, says Mike Mulray, chief operating officer and chief underwriting officer at Everest Insurance. \u201cMarket pricing has fallen from its peak; the kind of increases we were seeing last year and earlier this year have receded,\u201d he notes, and there are not expected to be dramatic changes to D&O terms and conditions.<\/p>\n In its 2022 Insurance Marketplace Realities report, WTW projects D&O rate increases for public companies next year will range from flat to 25%. Private and not-for-profit organisations can expect hikes of 5% to 40%, the report suggests.<\/p>\n Marriott\u2019s D&O renewal has been less troublesome than expected, Mastrapa says, shortly ahead of the 1 December deadline. \u201cWe have been able to identify new entrants so that we can get the limits we need, despite the fact that some carriers are lowering deployed capacity for the programme,\u201d he points out. \u201cWe feel the renewal should be pretty reasonable.\u201d<\/p>\n Cyber rates still climbing<\/strong> \u201cCyber is one line of business where, unfortunately, I don\u2019t see a silver lining,\u201d says Drummond. The frequency of ransomware losses is \u201castounding\u201d, he remarks, \u201cand until cyber professionals are able to get a better handle on ransomware, it\u2019s going to continue to be a challenge\u201d.<\/p>\n \u201cThat\u2019s a product that\u2019s still in its nascent stages even though it\u2019s been around a while now,\u201d Mulray says of cyber insurance. \u201cI think the market has been flexible with terms and conditions and customers, and brokers have been very successful in expanding the breadth and depth of the coverage. What we\u2019re seeing is underwriters recalibrate what they are willing to cover and how they charge for that,\u201d he adds.<\/p>\n Risk managers can expect the cost of cyber liability insurance to rise by 50% to 150%, according to the WTW report.<\/p>\n Among other liability exposures, construction projects in New York and Florida, and excess auto risks nationwide, are seeing big rate increases, according to Nicholas Freeman, associate managing director, casualty broker at Burns & Wilcox. \u201cCapacity is at a premium, rates are up, difficult renewals and everything that goes along with that,\u201d is the case for most risks in those classes, he says.<\/p>\n High rates are attracting fresh capital from new market entrants in many lines, especially in the excess and surplus lines market, Freeman says. \u201cWe\u2019ll see what fruit that bears in six to eight months, if new competition works to bring some of the rate increases down,\u201d he adds.<\/p>\n \u201cThe good news is there\u2019s still plenty of capacity,\u201d Baig says. \u201cThe bad news is there\u2019s a tipping point on the cost of that capacity. If a client is willing to pay, in most cases you can find the coverage and the capacity, but the costs as you move up the tower [are much higher than in the past],\u201d he notes.<\/p>\n Property cat concerns<\/strong> Marriott is looking ahead to its spring property catastrophe renewal after a challenging round in April of this year, Mastrapa says. \u201cProperty insurance was very, very tough,\u201d he remarks, \u201cbut I felt we landed pretty well. For us it was more about pricing and capacity than breadth of coverage.\u201d<\/p>\n The hospitality industry has faced difficult property renewals since heavy catastrophe losses were recorded in 2017, Mastrapa says. And the uncertainties around payroll and revenues as hotels recover from the pandemic are complicating underwriting for business interruption risks, he adds.<\/p>\n \u201cEvery reinsurer, alternative capital vehicle and primary insurer are revisiting what their appetite is in that space,\u201d says Mulray. Concerns over climate change, the increasing frequency of natural catastrophes and more intense storms have them reconsidering how much capacity they are willing to commit to the property catastrophe market, he notes.<\/p>\n \u201cThat said, it\u2019s not lost on us that some buyers are fatigued,\u201d after a few years of rate increases, Mulray says. \u201cBut it\u2019s important to remind people of what\u2019s driving that. One driver is that an insurer\u2019s cost of goods sold is not always known until quite some time after they sell the policy. And that\u2019s part of what you\u2019re seeing, even in a short-tail line like property cat,\u201d he explains.<\/p>\n Wages muddy comp picture<\/strong> Advances in technology that cause medical costs to rise are contributing to an increase in the severity of workers comp claims, Mulray says. And, he adds, uncertainty over wages is an issue.<\/p>\n Wage inflation in the US is making underwriting difficult for workers comp insurers, Mulray says. \u201cWhen you charge premium at the inception of the policy period and you\u2019re expecting a certain average wage,\u201d he notes, unexpected jumps in wages cause problems for insurers. \u201cThis is more of a short-term dynamic, but something that adds an element of complexity to the underwriting process.\u201d<\/p>\n If wages rise significantly and unexpectedly, as they have in some cases in the US, workers comp insurance rates are suddenly out of whack, according to Mulray. \u201cIt\u2019s a big difference compared to the rate you charged,\u201d he says.<\/p>\n","protected":false},"excerpt":{"rendered":" \u201cThere is no shortage of challenges in the renewal process,\u201d says Hector Mastrapa, senior vice-president of risk management at Marriott International. And the Covid-19 pandemic didn\u2019t help make this year\u2019s renewal process any easier, he adds. \u201cClearly, for many insureds, their exposure base is very different than it was in …<\/p>\n","protected":false},"author":10,"featured_media":85242,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_uag_custom_page_level_css":"","footnotes":""},"categories":[507],"tags":[],"acf":[],"uagb_featured_image_src":{"full":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-150x150.jpg",150,150,true],"medium":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-300x171.jpg",300,171,true],"medium_large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"1536x1536":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"2048x2048":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"image-publication":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-390x223.jpg",390,223,true],"image-publication-large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-476x272.jpg",476,272,true],"jannah-image-small":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-220x150.jpg",220,150,true],"jannah-image-large":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-390x220.jpg",390,220,true],"jannah-image-post":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021.jpg",700,400,false],"featured-2":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-530x340.jpg",530,340,true],"editors-pick":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-219x115.jpg",219,115,true],"archive-thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-375x375.jpg",375,375,true],"mobile-thumbnail":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-375x300.jpg",375,300,true],"single-feature":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-700x400.jpg",700,400,true],"square-thumbnail-s":["https:\/\/www.commercialriskonline.com\/wp-content\/uploads\/2021\/12\/US_shutterstock_1800684319_GRM-Dec-2021-100x100.jpg",100,100,true]},"uagb_author_info":{"display_name":"Tony Dowding","author_link":"https:\/\/www.commercialriskonline.com\/author\/tony-dowding-2\/"},"uagb_comment_info":0,"uagb_excerpt":"\u201cThere is no shortage of challenges in the renewal process,\u201d says Hector Mastrapa, senior vice-president of risk management at Marriott International. And the Covid-19 pandemic didn\u2019t help make this year\u2019s renewal process any easier, he adds. \u201cClearly, for many insureds, their exposure base is very different than it was in …","_links":{"self":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/85258"}],"collection":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/comments?post=85258"}],"version-history":[{"count":2,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/85258\/revisions"}],"predecessor-version":[{"id":85264,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/posts\/85258\/revisions\/85264"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/media\/85242"}],"wp:attachment":[{"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/media?parent=85258"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/categories?post=85258"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.commercialriskonline.com\/wp-json\/wp\/v2\/tags?post=85258"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nCosts for D&O liability insurance are seeing smaller increases as new capacity has entered that market, according to WTW\u2019s Drummond. \u201cThere were 24 new entrants into the D&O space in 2021,\u201d he points out. \u201cThat\u2019s generating over $100m in additional capacity and that capacity is driving this change.\u201d<\/p>\n
\nWhile trends are encouraging for some liability lines, they\u2019re not so rosy when it comes to cyber risks, sources say.<\/p>\n
\nCatastrophe losses in recent years have made the property market difficult for risk managers, sources concede.<\/p>\n
\nMulray says workers compensation insurance is a market to watch. While rates and loss frequency have declined in recent years, the market is \u201cstarting to kind of bounce around the bottom\u201d, he says. \u201cIt may not be until the second half of next year, but we anticipate rates will start to firm up.\u201d<\/p>\n