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Commercial Insurance Q1-2021 Market Update: Some Good News and Some Bad News

May 11, 2021

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

Good News, Bad News—that’s our characterization of the 2021 commercial insurance market in the first quarter. Let’s start with the bad news: rates are still increasing across all segments of the commercial lines markets. The good news is that the rate increases are starting to slow in some segments of the market. COVID-19 remains something that insurers are watching carefully as businesses reopen, but the vaccination rates are providing some optimism.

CML Update Q1 2021

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Some Eases in Rate Increases…for Now

In the Property market, the magnitude of increases has eased. Pristine risks which have favorable loss history, no CAT exposure, and risk improvements can expect minimal increases. Insurers are holding their breath because an active 2021 hurricane season has been predicted.

The story is similar in Casualty—buyers should still expect rate increases but the level of the increase will be based on loss history, industry, and risk characteristics. An example of a risk characteristic that continues to be a problem is large commercial fleets. Umbrella/excess casualty is a segment of the Casualty market that has experienced the largest rate increases over the last two years. New market entrants have brought much needed competition to the umbrella/excess casualty segment and we believe this is a contributing factor to the slowing pace of increases.

D&O and Cyber Markets Remain Challenged

While we’re happy to report the encouraging signs in the property and casualty segments, the D&O and Cyber markets remain challenged. Fitch’s recent report on the US D&O market revealed that despite a 40% growth in written premiums in 2020, the D&O industry loss ratio only decreased slightly. According to the Fitch report, written premiums grew by 20% in 2019. These statistics provide insight into why the D&O segment isn’t experiencing the same deceleration of rate increases that we’ve seen in the Property and Casualty segments. If the loss ratio barely moves after large premium increases, it means losses are continuing to increase. As long as D&O losses continue to increase, buyers can continue to expect premium increases.

Commercial Lines

In our Q4 2020 update we reported that the cyber market was rapidly deteriorating and this trend has continued into Q1 2021. Ransomware attacks were driving claim frequency in 2020 and that trend continues. The cyber market is challenged in places other than security breaches. These policies also cover liability and notification costs arising out of privacy violations—both breach and non-breach related. Class action litigation involving the Illinois Biometric Privacy Act increased significantly in 2020. Not only is this impacting premiums, some insurers are also restricting coverage.

 

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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.

Carolyn Polikoff

Senior Vice President, National Commercial Lines Practice Leader

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

Senior Vice President, National Commercial Lines Practice Leader

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