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

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.

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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%.

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.

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.

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

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