As we hit the halfway mark of 2020, this year’s unanticipated factors are rearing their heads and starting to have an effect on the market. In this Commercial Lines Insurance Market Update for Q2, we look at the state of commercial insurance, and how COVID-19 and the early summer riots and looting are impacting the directors and officers liability, property and casualty, cargo and stock throughput, and cyber liability markets. We’ve been watching these historic events closely and are continually communicating with underwriters to understand their perspectives. Taken together, these sources present a big picture of a market that was only recently bracing for impact, and is now dealing with the class-action suits and major claims it was anticipating.
Large securities class action settlements continue to affect D&O pricing and insurer concerns around the potential impact of COVID-19 are not helping the situation. Factors such as misleading statements about the outbreak, deceptive claims about potential vaccines and treatments, and privacy concerns are all driving litigation. All while underwriters are testing COVID-19 exclusions.
On the brighter side, thanks to the March ruling in Sciabacucchi, companies conducting an IPO have a way to cut down on litigation over alleged false and misleading S-1 registration statements, offering potential relief from duplicative state suits. If you’re not up-to-date on the implications of this ruling from the Delaware Supreme Court, we encourage you to dive in.
Losses from damages resulting from riots in late May and early June have been significant across the US, coming on the heels of several years of multiple large losses. Carriers report that commercial property pricing in the United States has increased every month since October 2017. We provide their perspective on the property market and have collected four reasons why premiums are increasing. The fact that the Property & Casualty industry has been above a 100 combined ratio in six of the last nine years shows that this segment has been losing money—meaning, of course, that rates go up.
Cargo and Stock Throughput
The Marine Cargo industry was not profitable in 2016, 2017, or 2018, and in 2019, several Lloyd’s Syndicate locations were closed following the decile 10 review, reducing available capacity. Couple that with significant stock losses from looting and rioting and a major tornado hitting a Dell storage facility in Nashville, TN, and the Cargo market is reeling. For those in maritime cargo shipping, the corrective actions that carriers are taking, such as increasing rates and deductibles and decreasing capacity, are significant in an already uncertain time.
In this Update we examine the trends affecting casualty insurance right now, including reduced capacity, huge liability claims, and umbrella policies. Commercial Auto underwriting results have delivered net losses to underwriters since 2010, and the fear of catastrophic liability claims looms large. With umbrella and excess liability rates rising at the fastest rates in decades, companies may be wondering what has changed after premiums had been flat for so many years. Find the underwriters’ perspective and our insights in this Q2 report.
We knew that adhering to privacy laws such as GDPR and CCPA would be a major issue this year in Cyber Liability. And while these regulations—and their steep penalties when they’re violated—are a major concern, ransomware is becoming an even larger threat that has only been more successful as more employees work from home. We’re reporting a 25% growth in the frequency of ransomware attacks from Q4 2019 to Q1 2020, and a 33% growth in the severity of ransomware payments over that same period. Don’t miss our perspective on protecting yourself from this type of attack as well as what information underwriters will likely need to know about how you’re avoiding ransomware attacks.