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Advisen Front Page News - Friday, November 20, 2020

P/C hard market conditions will continue into 2021: Willis


P/C hard market conditions will continue into 2021: Willis

By Erin Ayers, Advisen

Commercial insurance buyers in North America should plan for continued increases in nearly every line of coverage through 2021, but some of the hard market impacts should begin to stabilize by mid-year, according to Willis Towers Watson’s 2021 Insurance Marketplace Realities report.

In this market, one unlike any since the 1980s, the “best outcome buyers can hope for is flat renewals” in any line but kidnap and ransom, Willis stated in its report. There continues to be “extensive disruption” in the umbrella liability market, and the property market is “full of challenges.”

“We have to look back to the defining hard market crisis of the mid-1980s to see market conditions of the proportions we are currently experiencing — one of double- and triple-digit rate increases in most lines of business and dramatically reduced capacity in key lines,” said Joe Peiser, Willis’s global head of broking. “However, our experience in this hard market is that there is a wide range of results; renewal results are not huddled around the mean. This means underwriters are underwriting, and there is the opportunity to differentiate your risk.”

Willis’s report highlighted the COVID-19 pandemic, greater frequency and severity of natural catastrophes, higher losses in liability lines, and an increase in property damage stemming from man-made events as drivers of the hard market.

In the umbrella market, high-hazard risks should expect increases of 50% or more while lower-hazard risks are more in the range of 30% or higher. In excess liability, the rate hikes are even higher: 150% or more for the most challenged risks and 75% for lower or moderate risk. Willis highlighted coverage for wildfire, concussion/traumatic brain injury litigation, sexual assault/molestation, and communicable diseases as the most problematic exposures to insure. Such events, as well as opioid claims and mass shootings, have created “unsustainable combined ratios industry-wide” and have resulted in a drop in global capacity from $2.2 billion in 2018 to $1.4 billion in 2020. Willis added that actual deployed capacity is even less in the U.S. due to the litigation environment.

Difficult property risks currently face price increases of 30% or higher and buyers are seeing 15% to 25% for less-challenged occupancies. Willis predicted that rate increases will start to moderate by mid-year, assuming no major catastrophes occur. Directors and officers liability coverage, which led the hard market pricing in recent years, may also begin to ease up in 2021 with the entrance of start-up insurers. For now, both public and private D&O risks are seeing increases ranging up to 50%.

Willis cited auto liability as a line that “continues to be unprofitable” as claim payments increase. Insurers are responding with rate increases ranging up to an average 15% and restricting coverage. Workers compensation, as the casualty line with “the most COVID-19 claim activity,” is showing “slight increases.” Willis predicted a range of flat to 4% increases for workers compensation accounts for 2021.

Losses due to the pandemic continue to be unsettled, with the impact representing a “slow-moving crisis.” Willis predicted a range of losses earlier this year of $32 billion to $80 billion and noted, “At this point, it looks like the upper end of that range may be where we land.”

Some of the tougher market impacts may become more manageable due to expanded use of data analytics to streamline the risk transfer process for both buyers and sellers, according to WTW. Data-driven tools will help identify loss trends and keep tabs on emerging risks, better, the broker predicted.

“Every organization has been changed by the pandemic — some positively, many negatively,” said Peiser. “But as we look to the future, we are confident analytics, judgment and relationships will bring this difficult market to a new equilibrium — one that provides customers with protection from emerging risks and growing volatility and keeps the underwriting community relevant to world business. We may not see a precipitous return to soft pricing, but we will see moderation and perhaps some welcome sustainability — and increased relevance.”

Editor Erin Ayers can be reached at


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