Insurance Marketplace Realities 2021 spring update: After a few year-on-year increases, rates approaching technical adequacy in some lines, sectors
ARLINGTON, Va., April 22, 2021 (GLOBE NEWSWIRE) -- North American commercial property & casualty (P&C) insurance buyers can expect an ever-so-slight turn for the better and a less difficult marketplace in the months ahead, according to Willis Towers Watson’s (NASDAQ: WLTW) 2021 Insurance Marketplace Realities report. However, the global advisory, broking and solutions company says buyers will continue to face upward pressure on pricing across most lines of business for the remainder of 2021, primarily due to increasing severity of losses that have been the main driver of the hard market.
The company offered some positive news for buyers in the report. Property increases are not as steep as predicted last fall. In fact, according to the report, increases are expected to be lower than predicted last fall for 10 lines of insurance and about the same as predicted for almost half the lines. Only a handful of lines are expected to see higher increases — and some of those just slightly higher. The report conveys that the market has become more orderly and predictable, with rates approaching technical adequacy in some lines and sectors, as new capital has entered the marketplace.
“With higher rates attracting new entrants and coaxing some capacity to come off the sidelines, rate increases are beginning to decelerate, or at least stop climbing,” said Joe Peiser, global head of Broking, Willis Towers Watson. “It’s still a hard market, but to a large degree, the hard/soft market cycle is — or will soon be — proven again.”
The company narrates that a two-tiered market has emerged — one for better risks, one for poorer ones — and anticipates each tier will pay more for insurance in 2021, but those in the better tier will suffer considerably less. While there are wide variations by product line, good risks are finding ease of conditions, including more modest rate increases; others, not so much. Strict underwriting and cautious deployment of capacity on certain risks persist as the underwriting community grapples with systemic changes in the risk landscape.
“Because this hard market has been characterized by uncanny underwriting discipline, it’s important for insurance buyers to differentiate themselves into the good tier,” said Peiser. “Buyers and brokers should fight analytics with analytics to differentiate good risks from others in an insurer’s portfolio.”
As for specific lines, property rate increases, while still high, offer what passes as a bright spot in the current marketplace: For non-challenged occupancies, predicted increases fell from +15% to +20% in the fall to +5% to +15% now; for challenged occupancies, the range improved from +30% or more to +20% or more.
General liability predictions remain at +7.5% to +15%.
Casualty excess predictions are slightly less eye-popping than in the fall: from +150% or more for high-hazard buyers and +75% or more for low/moderate hazard buyers, to +100% or more for high-hazard and +50% or more for low/moderate.
Workers compensation continues to offer a respite from big increases, with some buyers even coming away with flat renewals.
Auto rate increases remain plateaued at +8% to +15%.
Directors’ and officers’ liability increases are decelerating, from +20% to +50% for public companies and +10% to +50% for private/nonprofit organizations in the fall to +10% to +40% for public and +5% to +45% for private/nonprofit now.
“Risk differentiation always begins with a strong commitment to risk management. We strongly believe that providing exposure data that is both current and developed with rigor paves the way for better renewal outcomes. High-quality data are also a necessary input for updated analytics and modeling,” added Peiser.
Property: A recent rise in the availability of capacity has created a two-tiered market: one for challenged occupancies and one for non-challenged occupancies.
Casualty: The commercial liability marketplace remains challenged; however, recent lead umbrella and excess liability renewal rates have been less volatile, a trend we expect to continue through 2021.
Auto liability: Auto liability premium rates and claim payments remain on the rise, with some insureds being forced to amend program structure to manage total cost of risk.
Directors’ and officers’: Rates, retentions and terms continue to see upward pressure, but capacity inflow in the public company space is yielding a deceleration of rate increases.
Cyber: As insurers continue their strategies to mitigate the financial losses from the significant increase in frequency and severity of ransomware incidents over the past year, they must now also assess how organizations may have been affected by the SolarWinds, Accellion and Microsoft Exchange Server breaches. In an already hardened insurance market, these recent developments are likely to tighten the terms and availability of certain cyber coverage for some organizations, especially for those that cannot demonstrate strong cyber risk controls, culture and overall cyber hygiene.
Key price predictions for remainder of 2021
+5% to +15%
+20% or more
+7.5% to +15%
High hazard: +50% or more
High hazard: +100% or more
Flat to +4%
+8% to +15%
+7% to +10%
Directors’ and officers’
+10% to +40%
Directors’ and officers’ (private and not-for-profit – overall)
+5% to +45%
Errors and omissions (large law firms)
+10% to +25% (higher for poor risks)
Errors and omissions
+10% to +15%
Employment practices liability
+20% to +40%
Fiduciary (financial institutions)
+15% to +50%
+25% to +50%
Flat to +20%
The Insurance Marketplace Realities series is published in the fall and updated every spring. A digital version of the report can be accessed on the Willis Towers Watson website, Insurance Marketplace Realities 2021 Spring Update, including a video message from Joe Peiser.
ABOUT WILLIS TOWERS WATSON
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving in more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
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