Insights

Rates Continue to Decelerate in Many Areas: Q1 2022 Commercial Market Update

May 16, 2022

/Property & Casualty/Management Liability/D&O

Market stabilization is the theme as we closed the first quarter of 2022. All the top commercial lines insurers reported rate deceleration, which many described as rate moderation. This means insurers are still reporting single-digit rate increases across their commercial lines business, but the level of the rate increase is either unchanged from the last quarter or slightly lower.

The big macroeconomic event in the first quarter was Russia’s invasion of the Ukraine. Since many commercial lines policies contain war exclusions, most insurers reported minimal losses and minimal expected ongoing impact. At the onset of the invasion, Swiss Re, one of the industry’s top reinsurers, estimated industry losses arising from the invasion to be in the $10 billion–$20 billion range. Swiss Re recently updated this guidance to report that it believes industry losses will be at the lower end of this range.

CML Update Q1 2022 thumbnailGet deeper insight into the most recent rate trends with our Commercial Lines Market Update.

D&O Continues to See Some Premium and Retention Decreases

For Directors & Officers (D&O) Liability, our characterization of the overall environment is flat. We started to notice decelerating rate increases in late 2021 and this trend continues to the point where some clients are seeing decreasing premiums and retentions. As of the end of the first quarter, premium and retention decreases mostly occurred for companies that have been traded publicly for some time with a history of strong earnings. We do expect this trend to continue and the number of new entrants to the D&O market ramp up their staffing and quote more business.

Securities class action severity remains high.

488 open securities class action cases are still pending with the 2021 average settlement of $32M

Property and Casualty Face Moderate Rate Increases, though Workers’ Comp Remains Profitable

Both the Property and Casualty segments are reporting moderating rate increases. In the Property segment, insurers are reporting that rates are keeping pace with loss costs. If loss costs rise rapidly, insurers will likely look to increase rates again.

CAT and Non-CAT Account Loss History

CAT and Non-CAT Account Loss History graphic showing 0%-5% of account are Non-CAT with favorable loss history

On the Casualty side, Workers’ Compensation remains a profitable line of business, so insurers are keeping rates flat and, in some cases, offering competitive quotes on other casualty segments to win the workers’ compensation line of business.

Cyber Market Continues to Suffer

Finally, Cyber continues to be the outlier to the positive trends we’ve seen in the other areas of the commercial market. Premiums continue to rise as insurers cut policy limits and restrict coverage. Given the continued problems with ransomware losses and concerns over increased threats arising from the Russian-Ukrainian War, we don’t expect relief in this market any time soon. Clients should continue to focus on having up-to-date cybersecurity measures in place. Good security controls will not necessarily reduce premiums, but they can mitigate the level of premium increases.

In our Cyber Looking Ahead Guide for 2022 we queried underwriters on their outlook for the year.

76% of underwriters believe coverage will contract in 2022

For greater insight into the insurance impact of the first quarter of 2022, download your copy of the Commercial Lines Market Update.

DOWNLOAD PDF >>

CML Update Q1 2022 thumbnail

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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