Capacity constraints, particularly for disaster-prone locations, will continue to drive commercial property insurance rates higher this year, according to a report from USI Insurance Services Inc.
The frequency and severity of severe weather events, lack of reinsurance, an uncertain economy and inflationary pressures are prolonging the pace, capacity and coverage challenges in the real estate market, putting a strain on policyholder budgets, USI said.
Even more favorable risks, such as catastrophe-exposed property with minimal loss history and good risk quality will see rate increases of 25% to 150% in the second half of this year, up from 15% to 50% rate increases in the first half, USI said in its commercial property for mid of the year and outlook for casualty market released on Tuesday.
Less favorable real estate risks with poor loss history or risk quality will continue to see rate increases of 25% to 150%, unchanged from the start of the year, while optimal real estate risks will see rate increases of 5% to 15%, compared to 5% to 10% at the start of year, according to USI.
Some property/casualty insurance buyers will see rates trend lower as parts of the market continue to stabilize, USI said.
Public company directors’ and officers’ liability rates show flat to 20% half-year rate cuts, compared with flat 10% down in the first half, USI said.
D&O rates continue to be “very competitive,” but insurers may begin to push back on a second consecutive year of significant rate cuts, feeling rate adequacy is no longer there to support profitability, USI said.
Cyber insurance policyholders are seeing flat rates for optimal risks, compared to 20% or higher rate increases at the start of the year. For more challenging cyber risks, the rate of increase is 15% or higher, compared to 20% or more at the beginning of the year.
“The cyber market is improving significantly, but is constantly facing new threats and therefore remains a critical area where insureds should stay up-to-date,” USI said.