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.
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.
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
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.
For greater insight into the insurance impact of the first quarter of 2022, download your copy of the Commercial Lines Market Update.
Find out more about war exclusions, where they may apply in light of the invasion of Ukraine, and how to prepare your organization.
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