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Commercial Lines Insurance Market Update: Continued Uncertainty and Deterioration

February 2, 2021

Property & Casualty

By the end of the fourth quarter in Q4 2020, rates in all segments of the commercial lines market were up again, and for the same reasons reported in past quarterly updates: increased claims frequency and severity which was exacerbated by COVID-19 uncertainty.

In this Commercial Lines Insurance Market Update, we continue to analyze the state of the market, from COVID-19 to ransomware, to help you prepare for increasing premiums and other impacts on your business.

READ THE FULL UPDATE >>

Market Trends You’ll Find in the Report

D&O Market Update

COVID-19 is prolonging an increasing premium environment in the D&O and Casualty segments of the market. Public D&O rates continue to go up as elevated litigation frequency and increasing severity contribute to carrier losses, which drives premiums up. Carriers continue to seek large premium increases and upward adjustments on retentions, while in some cases simultaneously cutting limits; increases are generally more severe on excess layers.

D&O insurers are concerned that the longer the pandemic continues, the more private companies will fail and public companies will have more financial problems that were not adequately disclosed, leading to even more D&O litigation.

The economic uncertainty created by the COVID-19 shutdown is resulting in more D&O litigation due to factors such as misleading statements about the outbreak, deceptive claims regarding potential vaccines and treatments, and privacy concerns. Some underwriters are testing COVID-19 exclusions.

As a result of the March 2018 Cyan decision, IPO pricing and retentions have skyrocketed, though the March 2020 Sciabacucchi ruling on federal choice of forum in the Delaware Supreme Court led to several state court Section 11 suit dismissals in California.

Cargo & Stock Throughput Market Update

Cargo/STP rates continue to rise but as the Cargo market moves closer to a return to profitability, insurers’ focus has shifted to risk selection, maintaining consistency, and ensuring rate adequacy going forward.

Rate rises are still prevalent, but most syndicates agree we are through the worst of the remediation of their portfolios.

Most insurers have shifted focus from “rate rise” to “rate adequacy.” This should be seen as a positive for programs that have already seen significant increases and show good loss records and/or high levels of risk management.

Property Market Update

In the property market, Q4 saw the end of “cat season” with no severe hurricanes like years past, but wildfires and convective storms have increased in both frequency and severity. As a result, property insurers haven’t experienced much relief to their balance sheets.

New capital continues to enter the property market via new carriers and growth initiatives for existing markets. This could limit the duration of the upward pressure on rates; however, that likely won’t be experienced until the second half of 2021.

Casualty Market Update

Nuclear verdicts continue to be a concern driving excess casualty pricing ever higher.

Demand for umbrella/excess limits continues to exceed supply, driving up rates for most commercial insurance buyers. Increasing claims cost trends for Auto, GL, and WC (including COVID-19 claims) maintain pressure on primary rates.

Cyber Liability Market Update

The major development in Q4 was the rapid deterioration of the cyber market. We started to see some subtle upward movement in rates in the earlier quarters of 2020 but that upward trend escalated in Q4. Rates are increasing 30%–60%+ across the board–regardless of industry vertical or size of company.

Ransomware attacks are the main culprit. Carriers increasing rates due to ransomware loss payments and we are starting to see restricted terms around this coverage. At the very least, cyber buyers should expect a lot more questions about ransomware controls and overall cybersecurity measures at renewal.

READ THE FULL UPDATE >>

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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