What to Look for in Commercial Insurance Market Conditions in 2020

According to a recent analysis from broker USI Insurance Services, ongoing rate rises and capacity cutbacks are taking shape in most property/casualty business lines in the fourth quarter—and for some, will continue into the new year.

Only one line—loss sensitive workers’ compensation accounts—showed lower fourth-quarter rate estimates compared to midyear, while seven others remained unchanged.

According to USI’s Q4 2019-2020 P&C Insurance Market Outlook Report, which examines 28 different product lines as well as forecasts from a prior midyear update compared to observations of fourth-quarter pricing, the other 20 lines, including all property lines, general liability, umbrella, and cyber, had indications of higher rate changes for the fourth quarter than at midyear.


Among the other findings in the report:

Wildfire is no longer an afterthought in the property insurance market.

AIG, FM Global, and Lloyd’s of London, three industry leaders, are closely analysing their North American property business, which affects capacity, prices, and coverage.

In casualty insurance, the bulk of coverage lines are firming because capital is being spent considerably more conservatively and carefully, rather than due to capacity restrictions.

Unlike commercial car liability, which has been firming for three or four years, the market for primary general/products liability and umbrella/excess liability firmed swiftly beginning in the fourth quarter of 2018. Prior rate increases were short-lived, but the current climate of more stringent risk selection, tighter underwriting standards, and lower competition is proving to be far more consistent, persistent, and severe than anticipated.

Markets are increasingly hesitant to offer primary liability lines without workers compensation, particularly for bigger accounts.

Deteriorating casualty loss patterns, typified by an increase in the frequency of severe losses, have prompted markets to quit some lines, limit capacity, and significantly raise premiums. These activities affect all industries and classifications, independent of market tenure or loss history.

The demand for casualty rate hikes is not projected to reduce significantly throughout 2019 and into the third- or fourth-quarter of 2020.

USI has observed an average lead umbrella capacity drop of $25 million to $15 million or less, with no matching decrease in rates and capacity reallocation higher up in towers.

Excess markets are fleeing what they perceive to be below-market price; fresh market capacity is not entering.

In the public directors and officers liability (D&O) market, USI said it has seen more rate increases in the first three quarters of 2019 than it has in the previous 16 years. According to the research, “we have definitely now shifted into a carrier-dictated market.”

The flat-to-ten percent rate change suggestions indicated on the chart above are not the norm for large corporations or key targets in cyber. USI has seen premium increases of up to 20% and SIR increases of up to 50% for insureds with over $1 billion in revenue and those in “challenging classes” such as retail, hospitality, health care, and financial institutions, and the broker expects this to continue for the rest of this year and into the first half of 2020.…