Interest rate increases for general liability and umbrella coverage were dampened during the first half of 2022 to low double-digit price increases when more capacity entered the sector, say industry experts.
The available limits are limited but increasing, they say.
Although percentage increases have come down from the high double-digit and triple-digit increases in recent years, some difficult investments remain, such as commercial cars.
Mid-year increases for primary general liability average in the high single-digit percentages, says Chris Kopser, New York-based president and chief underwriting officer, primary casualty, for Americas at Axa XL, a unit of Axa SA.
Interest rate hikes in excess debt markets have been on a “roller coaster”; in recent years and are now in the upper single-digit percentage to low double-digit percentages, said Donnacha Smyth, president of excess accidents, Americas, at Axa XL.
On average, interest rates are still up, but the extent of the rate hikes is slowing down, says Douglas O’Brien, head of the National Practice Division, Accidents and Alternative Risk, in New York for USI Insurance Services LLC. In some cases during the second quarter “we were able to negotiate more flat renewals for general responsibility, which was practically impossible two years ago.”
“We are still seeing positive movements in the price, albeit slower than the price change in 2020 and 2021,” said William McElroy, New York-based portfolio director for Aspen Insurance Holdings Ltd.
New capacity has helped stabilize prices, says Bill Wilkinson, National Accident President of Alpharetta, Georgia, for Risk Placement Services Inc., a unit of Arthur J. Gallagher & Co.
The umbrella capacity, which had decreased significantly, is starting to reappear, O’Brien said. Customers would have been “lucky” to get lines of $ 5 million to $ 10 million just two years ago, but some insurance companies are starting to distribute $ 15 million to $ 25 million again, depending on the business area and other factors.
“Filling out a tower of more than $ 100 million is still a challenge, but $ 50 million and below is much easier today than it was a few years ago. Even up to $ 75 million will be easier to do,” O’Brien said. .
Policyholders should expect “moderate” interest rate hikes for the remainder of 2022, said David Gale, the area’s senior vice president, accident clinic, at Gallagher.
“We are still seeing interest rate hikes, but we agree that they are on a much smaller scale than they were in the last two years,” Gale said. New capacity in the middle and upper layers of the responsibility tower has helped to moderate increases, he said.
According to market experts, sources of new capacity include: Ark Syndicate Management Ltd. in London, which expanded to Bermuda last year, and Bermuda – based general agent Arcadian Risk Capital Ltd., which operates on a delegated authority basis on behalf of SiriusPoint Bermuda Insurance Co. Ltd. None of the companies responded to requests for comment.
Several sources said that liability coverage for commercial car fleets remains a challenging investment that is subject to capacity restrictions and further increases. “We are still concerned about the recent nuclear deal,” McElroy said.
Policyholders have sought different ways of controlling insurance expenses as prices have risen in recent years. Mr O’Brien said there was a willingness on some insurance companies to offer more favorable terms when primary cover is combined with cover, “to provide price relief when they write more of the package.”
Higher deductibles and retentions are common. “We definitely have these conversations with customers about the different ways to help deal with the continued increases,” Gale said. “Some customers make that decision and others do not.”
Increased inflation also affects insurance investments. “Inflation is something we think about a lot. What price do we charge today for the damages tomorrow? ” in Mr. Smyth.