New risks, old risks, and an ongoing hard market test buyers and brokers in 2021
Advisen
New risks, old risks, and an ongoing hard market test buyers and brokers in 2021
By Erin Ayers, Advisen
Businesses face a host of new risks ushered in by the pandemic along with traditional risks, meaning the U.S. property/casualty insurance market will be tested like never before, according to USI Insurance Services’ mid-year market outlook.
“As businesses reopen, employees will return to a different workplace, both physically and culturally, and companies will face a different risk landscape,” said Robert Meyers, SVP and property/casualty leader at USI. “But even in a tough insurance market — in many cases, especially in our current market — businesses can take major steps to significantly improve their risk profiles, reduce costs and ultimately increase profitability.”
Even while posting a profit in 2020, property continued to be the loss drag for the industry, due to substantial increases in losses due to wildfire, riots, and the February winter freeze event. Buyers with moderate to high claims history will see rate increases over 20% in 2021, but accounts with lower losses and strategic loss control will be able to tap into the ample capacity in the market, USI said.
Umbrella/excess liability remains the most challenging casualty market, according to USI, and although some new capacity is entering the market, the impact will take time to be felt. New capacity also isn’t coming in with lower, competitive prices, the broker added. Average rate increases of 15% to 25% are common, with higher-hazard risks seeing double- or even triple-digit hikes, USI said.
Public company directors and officers liability (D&O) is beginning to show signs of “relative stability” in 2021, with the exception of coverage for special purpose acquisition vehicles and initial public offerings, USI explained. These transactions are seeing premiums and retentions well above traditional risks, USI said. New capacity for excess D&O layers has eased the price crunch somewhat in 2021, the broker added, with premiums up 10% to 50% in the second quarter, rather than 2020 price increases of 20% to 100%.
That said, the D&O market faces challenges due to potential bankruptcies stemming from the pandemic, defense cost inflation, environmental, social, and governance (ESG) claims, litigation around cyber events, and the impact of social media on stock market volatility, USI commented.
Cyber insurance now ranks among the toughest lines, with prices going up between 25% to 50% “when insureds have a complete submission, optimal ransomware controls and no material loss events.” For the “less optimal” risks, prices hikes are more in the range of 50% to 100%. Brokers should be focused on working with clients to improve their risk profiles to achieve more and better coverage, according to the report.
