Most general and excess insurance buyers paid more for his or her coverage at year-end renewals, but the rate of increases was lower than the sharp pricing spikes recently plus some buyers obtained rate decreases.
Increased competition among new and established insurers, a feeling the increases of the past three to four years have improved profitability for insurers, minimizing losses because of the continued closure of numerous courts, combined to keep average primary rate increases in single digits and excess rates in low double digits, brokers and underwriters say.
In addition, insurers are in some cases walking back disease exclusions imposed in the outbreak of the COVID-19 pandemic but are imposing tighter underwriting conditions on accounts exposed to “forever chemicals” or sexual molestation risks, they say.
Rate increases will likely continue to moderate in 2022, but widespread rate cuts are unlikely, they are saying.
General liability rates increased within the single digits at Jan. 1 renewals and more increases are likely within the all 2022, said Chris Kopser, New York-based chief underwriting officer, primary casualty, for that Americas at Axa XL, a unit of Axa SA.
“The rate increases continues because severity continues to outpace rate. It is simply that simple,” he explained. “We've definitely seen litigated claims going through the limit more frequently.”
Primary general liability rates have raised by single-digit percentage points in the last several years, but nonetheless don't reflect the increase in average losses, said Chicago-based Neal Bhatnagar, executive v . p ., major accounts casualty, in Liberty Mutual Insurance Co.'s global risk solutions division.
“Going forward, industry is still in a position to need rate, to maintain that trend,” he explained. While there was a lull in so-called social inflation when courts closed during the pandemic, insurers expect the trend of increased court awards and settlements to come back, he said.
Primary liability underwriters are pushing for moderate rate increases however in some cases buyers can acquire rate decreases by moving their programs to other insurers, said Andre Eichenholtz, New York-based executive vice president-M&A diligence and portfolio solutions, and co-head of property/casualty at CAC Specialty, a joint venture partner of Cobbs Allen.
“If somebody looks at a bit of business that's new, they are being opportunistic, where most likely the incumbent carrier was indiscriminately increasing rates for everyone,” he said.
While renewal rates remain significantly greater than before the hard market, buyers can obtain significant savings in contrast to newer renewals, Mr. Eichenholtz said.
“If you are able to give a carrier a good reason to get to in which you think they should be, they will absolutely provide a program that's much better than exactly what the general market's been doing,” he explained.
New entrants are adding capacity to the marketplace, but aren't undercutting the marketplace, Mr. Eichenholtz said. “It differs this bypass,” he explained.
Twane Duckworth, md, risk management, for that town of Garland, Texas, along with a Risk & Insurance Management Society Inc. board member, said he saw a single-digit increase at his October renewal, but he expects to see better terms this season.
The municipality's liability losses have not exceeded its $750,000 self-insured retention for several years, he explained.
“For 2022, I plan to really reevaluate this program,” said Mr. Duckworth, who joined Garland's management after 2022.
“I'm planning to go to the market with a bucketload of information and say, 'Hey, not only are we a good risk, but we are a class A risk that you'd desire to have.'”
Excess layers
Excess liability rate increases also are moderating.
“2022 would be a little bit of a kinder, gentler year towards the insureds and brokers as far as rates are concerned,” said Baltimore-based Diana Cossetti, senior vice president and chief underwriting officer-specialty lines, excess and rail in Liberty Mutual's global risk solutions division.
In 2022, average excess rates increased a lot more than 25%, however in 2022 lead umbrella rates increased 10% to 20% and higher layers increased 25% to 30%. In 2022, umbrella rates will probably stabilize and increase 10% to 15%, and excess rates will rise 5% to 10%, Ms. Cossetti said.
On tougher risks, established insurers are still reducing the capacity they are making available but a lot of new capacity is entering the market, Ms. Cossetti said.
Average rates increased within the “low teens” at year-end renewals, however, many buyers, such as the ones that saw big increases in past many marketed their programs, obtained rate decreases, said Jesse Paulson, New York-based excess casualty leader for Marsh LLC.
Limits remain constricted in contrast to limits available prior to the market hardening, when $25 million lead umbrella limits were common, brokers and underwriters say.
But insurers are willing in some instances to offer larger limits, for example when they're trying to write both primary and lead excess layer, Mr. Paulson said.
“Where some insurance company includes a good comfort level using the risk associated with a given client and are very thinking about writing that primary line, they may increase the umbrella limit well beyond $10 million or $15 million,” he explained.
Overall market capacity for most large excess liability buyers stands at between $700 million and $800 million, but it is still possible to buy $1 billion towers, Mr. Paulson said.
Several large insurers curtailed their excess liability business over the past 3 years, including American International Group Inc. and Swiss Re Corporate Solutions, but the market has largely stabilized with new and existing insurers competing more for business, brokers and insurers say.
Axa XL done transforming its excess liability portfolio in 2022 and 2022, but 2022 marked coming back to more general portfolio management, said Donnacha Smyth, Bermuda-based chief underwriting officer, excess casualty for that Americas at Axa XL.
“We continue being in a capacity-restricted marketplace for excess,” he explained. “We saw rates in excess casualty peak in Q3 2022, and while rate has remained strong it's kind of been a steady decline month over month.”
Excess rates across Axa XL's book increased between 15% and 25% at Jan. 1, which is substantially lower than rate increases a year earlier, he explained.
Coverage changes
During recent renewals, insurers have changed policy wordings and coverage terms, in some instances restricting coverage however in other cases easing terms.
Underwriters have restricted coverage of so-called forever chemicals, for example PFAS, that are used in some household goods and industrial processes. They've also restricted coverage for accounts subjected to sexual molestation claims in light of large settlements paid by youth and religious organizations in the last several years.
Insurers are inserting exclusions, reducing limits and changing claims triggers, among other things, to manage the exposures, market participants say.
But they're easing restrictions on communicable disease coverage and removing or changing exclusions imposed at the outset of the pandemic as significant third-party liability-related losses have largely not materialized.
“There is going to be litigation, it simply hasn't turned out to be something that systemic in nature,” said Mr. Paulson of Marsh.
