Commercial property insurance rate increases are easing off initial spikes following 2017’s record natural catastrophe losses, but commercial insurance buyers still face upward pricing pressure on many lines of business for the remainder of 2018.
That’s according to Willis Towers Watson’s 2018 Insurance Marketplace Realities — Spring Update report (formerly titled, Marketplace Realities).
Overall, the property/casualty marketplace remains well capitalized, buoyed by the strong appetite of alternative capital providers.
The ability for the industry to recover swiftly following 2017’s record natural cat losses — without widespread hardening or any insurer insolvencies — demonstrates a “new level of resilience,” said Joe Peiser, head of Broking, North America, Willis Towers Watson.
According to the report, most buyers can expect their insurance spend to rise in 2018, although not as dramatically as some expected last quarter. Dynamics within individual lines of business are nuanced, with many lines experiencing a mix of price increases and price decreases.
The spring report’s highlights include:
Property: Buyers may experience rising prices in response to the 2017 cat losses; however, predicted rate increases have moderated since Willis Towers Watson published its November report, and some buyers will be able to contain increases to a modest level or even obtain small decreases. For buyers approaching renewals, aggressive marketing may be rewarded, although that could involve displacing an incumbent insurer. Pricing forecast: non-cat exposed –5% to +5%; cat-exposed +5% to +15%; cat-exposed with losses +15% to +20%.
Casualty: While many thought that the property catastrophes would also have an effect in the casualty market, to date WTW says it has not seen a widespread increase in casualty rates, although certain lines of business remain challenging. Buyers will experience incremental upward pressure on general liability, umbrella and excess liability lines. WTW’s current forecast reflects a slight uptick from the price prediction it offered last fall. Pricing forecast: flat to +4%.
Auto Liability: Ongoing market challenges exist in this space, and two years of steady price increases have not kept pace with loss trends and adverse developments. Rates are expected to rise more steeply, and some buyers may even see double-digit increases. Pricing forecast: +5% to +9%.
Health Care Professional Liability: The marketplace for the long-term care and senior living facilities sectors is growing more complicated. Rising frequency and severity of claims in these sectors is putting tremendous upward pressure on this line of business. Some carriers have exited the market due to adverse underwriting performance. Pricing forecast: +5% to +20%.
Cyber: Global ransomware/extortion claims dominated 2017, and resulting costs are estimated to exceed $5 billion, a 15-fold increase in two years. Yet new capacity continues to keep the marketplace largely competitive; renewals for primary and excess cover are averaging single-digit increases. Insurers have tightened pricing and increased self-insured retentions and deductibles for companies that have not addressed vulnerabilities. Pricing forecast: –3% to +5% for organizations without claims or recent incident.
The spring update also points to several lines of business where pricing has changed direction since WTW published its November report. For directors and officers liability, many buyers will now face increases of up to 5%. The environmental sector is experiencing its first hard market in over a decade. Buyers could face rate increases as high as 20% for site pollution liability coverage.
“Navigating this dynamic marketplace demands a strategic approach, and buyers facing renewals should focus on creating submissions using distinguishing data and narratives to set themselves apart from their peers,” said Peiser.
Summary of price predictions for remainder of 2018:
|Non-cat risks:||–5% to +5%|
|Cat-exposed risks:||+5% to +15%|
|Cat-exposed with losses:||+15% to +20%|
|General liability:||Flat to +4%|
|Umbrella:||Flat to +4%|
|Workers compensation:||–2% to +2%|
|Auto:||+5% to +9%|
|International:||–10% to –5%|
|Directors and officers:||–5% to +5%|
|Errors and omissions:||Flat to +5%|
|Employment practices liability:||Flat to +5%; +5% to +10% in California; +15% to +30% for media/entertainment:|
|Fiduciary:||–7.5% to +5%|
|–3% to +5% (no claims activity or recent incidents)|
|Most risks:||–2% to flat|
|Tier 1 and non-tier 1:||Flat|
|All lines||Flat to +20%|
The Insurance Marketplace Realities series is published in the fall and updated every spring.
- What to Expect for Commercial Insurance Pricing for 2018: WTW’s Fall Report
April Reinsurance Renewals Continue Flat Pricing Seen in January: Willis Re Report
Widespread Market Firming Unlikely Even as Property Rates Rise: WTW
Was this article valuable?
Here are more articles you may enjoy.