Insights

The Q3 2023 Commercial Insurance Market: Social Inflation, Cyber Threats, and D&O Surprises

November 17, 2023

/Property & Casualty/Management Liability/D&O/Cyber Liability

Third-quarter headlines in the insurance market are typically dominated by the Atlantic hurricane season. However, this year’s hurricane season has been relatively benign, shifting the focus this quarter to other market segments.

In this Q3 2023 Commercial Lines Insurance Market Update, we review insurance rates and pricing trends in the directors and officers (D&O) cyber, casualty, and property segments. Read on for a summary of our key insights or download the full report below.

Commercial Lines Market Update Q3 2023 Cover

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Focus on Casualty: Social Inflation Fuels Rate Increases

Casualty rate increases had started to level off in late 2022, but they ticked up again in Q2 2023, particularly in auto and excess casualty, and this trend continued into Q3. Many insurers specifically mentioned casualty as an area that requires continued attention in Q3 earnings calls—the main culprit they cite for continued rate increases is social inflation.

Property Rate Increases Will Likely Continue Into 2024

Although the Atlantic hurricane season was mild, the property rate increases we’ve seen in the first half of the year continued into Q3 and are expected to continue into 2024. The mild hurricane season isn’t helping the property market because losses have been driven by secondary perils, which include hail, tornados, and severe wind.

Property insurance carriers continue to scrutinize valuations. However, the magnitude of year-over-year increases in material and labor is slowing. When current values are appropriate, we’re seeing year-over-year building and equipment replacement cost increases of about 4%.

Q4 2023 Projected Rate Changes

Favorable Conditions for the D&O Market

On a more positive note, favorable market conditions for insurance buyers continue in the directors and officers (D&O) segment. D&O premiums continue to fall despite the fact that 2023 looks like it will be a record-breaking year in terms of securities claims settlements. Many insurers have been warning that the current rate environment is unsustainable based on developing losses, but the abundant capacity is keeping premiums low.

$12.8M medium settlement, 3% likelihood of being sued

Cyber Premiums Continue to Fall

Cyber is the other segment of the market where premiums continue to decrease. Much like D&O, insurers are raising concerns, particularly around the increase in ransomware attacks throughout 2023. In addition, carriers have restricted wrongful collection coverage in response to claims activity.

Clients are concerned about the growing popularity of artificial intelligence (AI) tools, including privacy considerations and loss severity.

avg. ransom: $850700 payment, medium ransom: $200k payment

For more insights into the insurance trends and pricing changes of Q3 2023, download your copy of the Commercial Lines Insurance Market Update.

Commercial Lines Market Update Q3 2023 Cover

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co. The information in this article is for general informational purposes only; it is not intended to and does not constitute legal advice.

Carolyn Polikoff

President, Commercial Lines

Carolyn oversees our firm’s property & casualty and management liability services on an enterprise-wide basis, working to ensure consistent client service and strategy under a unified national structure.

415.402.6513

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Carolyn Polikoff

President, Commercial Lines

Carolyn oversees our firm’s property & casualty and management liability services on an enterprise-wide basis, working to ensure consistent client service and strategy under a unified national structure.

415.402.6513

LinkedIn