Insurance Buyers Still Face Challenges at Mid-Year: USI

Despite stabilization in several lines, the second half of 2022 will remain challenging for insurance buyers, particularly in the cyber market, according to a mid-year outlook from USI Insurance Services.

Source: Advisen | Published on June 6, 2022

Commerical Lines rates moderate

“Some of the traditional (non-COVID-19-related) trends continue to take center stage, such as the frequency and severity of claims, underwriting discipline, insurance capacity, the cost of reinsurance, natural disasters, cyber risks, and others,” said USI in its report. “At the same time, emerging trends demand our attention, including challenges related to the supply chain crisis, the conflict in Ukraine, and environmental, social and governance (ESG) issues.”

Cyber continues to face tough underwriting and pricing increases, with average hikes of 60% for even optimal risks, USI said. Less-desirable accounts see price increases more in the 100%-plus range, the report indicated. On excess layers, even accounts with no losses are seeing price increases of 80% to 100%, USI said.

Directors and officers liability insurance pendulum may have swung the furthest from the hard market highs, with USI saying the market has “continued its trend toward a buyer’s market.” A drop in federal securities class actions and new market capacity has made the difference, according to the report. USI predicted average price changes for the coming months at flat to 15% increases for primary layers and 10% decreases to 5% increases for excess.

For much of the country, commercial property insurance market has stabilized, USI reported, with a range of average price changes from flat to 20% for high-risk accounts. However, the line continues to face headwinds from rising loss frequency and severity propelled by inflation and “skyrocketing” repair costs. Insurers are deploying capacity cautiously, and pressing for double-digit increases in property valuations.

With an active hurricane season predicted, insurers are steering clear of coastal properties in many cases, according to the report.

“We have seen carriers move toward providing inferior coverage, increased deductibles, unfavorable warranties and/or conditions, expanded exclusions, and higher rates that generally start at 15% to 25% or more over expiring,” said USI. Roof condition on buildings older than 20 years has become a major sticking point, facing reduced capacity and pricing pressure, the broker noted.

In the casualty market, umbrella and excess liability competition has improved, thanks to new market entrants providing capacity. However, it isn’t widespread in the market, with many buyers still seeing coverage restrictions and price increases.

No broad-brush advice will work for buyers in today’s market, USI concluded. Brokers will need to help clients on a case-by-case basis and examine the specific conditions affecting their industries, location, and account sizes.

“Any trend will affect some organizations more than others, and few solutions will work universally across all industries, size of business, geography, line of coverage and program structure,” noted USI.