Buyers of general liability and excess policies saw largely modest price increases at the turn of the year as insurers continued to push through single-digit rate hikes, citing concerns about inflation and higher court rulings and settlements.
The moderation in primary and umbrella increases, which also characterized last year’s renewal season, contrasts with the much stronger increases introduced in 2021 and earlier years. Excess liability inventory saw more competition and prices fell for some accounts, market experts said.
Insurers remain concerned about the backlog of claims due to limited access to courts during the covid-19 lockdowns and issues such as exposure to lawsuits related to so-called forever chemicals, but increased capacity from new and existing insurers is helping to keep a price cap. they say.
The tough market of the past few years appears to have leveled off, said Casey Petersen, Chicago-based head of US claims at brokerage McGill and Partners.
“We haven̵7;t seen the drastic declines that we might have thought we’d start to see, but what we’re seeing is that peak of (the market), and it’s really just sustained,” he said.
Zurich North America saw average single-digit rate increases on its recent general and excess liability renewals, said Paul Lavelle, New York-based director of U.S. national accounts at the insurer.
“It was pretty steady in November and December, and looking at 1/1, we got the increases we expected, both in the primary and in the surplus,” he said.
General liability increases were in the mid-single digits, said Emily Crawford, senior director liability product management, global risk solutions, for Liberty Mutual Insurance Co. in Miami.
The severity of the claims continues to “tick up” due to higher court rulings, increased inflation and rising medical costs, among other things, Crawford said. “So we have to continue to make sure that we’re all funding the insurance that’s needed by everyone,” she said.
In excess, claims cost trends are in the mid-teens, but rate increases are in the mid-single digits, which is not sustainable, said Jon Tellekamp, chief underwriting officer, excess casualty, global risk solutions, at Liberty Mutual in Boston.
The market is more stable, said Dave Arick, assistant treasurer, global risk management, at International Paper Co. in Memphis, Tennessee.
While the pulp and paper maker received more questions from insurers about issues such as supply chain exposures, its liability levels were flat to slightly higher at year-end, depending on inventory, he said.
International Paper retains much of its primary exposure and there are still only a handful of insurers offering lead umbrella coverage to companies in its sector, but there is more capacity to enter the excess liability market, said Arick, who is a director of the company. Risk & Insurance Management Society Inc.
More competition for higher excess inventory has limited price increases. New start-ups such as Vantage Group Holdings Ltd. and Helix Underwriting Partners Ltd. in Bermuda and London-based Inigo Ltd., and established insurers, such as London-based Ascot Group Ltd., which also has operations in the United States and Bermuda, added capacity to the market, experts say.
In addition, incumbent insurers expanded their capacity on renewal business, said Ed McNenney, a New York-based vice president at Willis Towers Watson PLC.
“They say, ‘Well, I gave you $10 million last year, I might be able to give you $15 million this year,'” he said. And insurers may be willing to offer more capacity if their limits are distributed or vented through a coverage tower, Mr. McNenney.
Prior to the onset of the hard market in 2018, approximately $2.2 billion in total capacity was available for liability programs; which fell to about $650 million as the market tightened but has since rebounded to about $1.5 billion, he said.
The increased capacity has led to some “significant reductions in excess inventory in the simpler accounts,” McNenney said.
Mr. Tellekamp said Liberty Mutual offers its capacity at different layers within redundant towers. But “something that we have to look at as the losses increase in frequency and severity is: Are we getting paid enough for both of these layers?” he said. “Losses can go from zero to $50 million or $50 million to $500 million in an instant.”
Problems in the property insurance market are also affecting the liability market as insurers look to take a multi-line strategy that offers scarce property capacity in exchange for broader participation in liability programs, said Dan Aronson, US head of casualty management for Marsh LLC in New York.
“I think multi-line strategies will be driven by the markets throughout the year,” he said.
Concerns remain over a backlog of claims after limited access to court during the Covid-19 pandemic, which effectively increased the tail of liability claims, as well as rising court orders and settlements or “social inflation”, insurers and brokers say.
“There is nothing coming out of the covid period with social inflation, which means the greater valuation of cases, which makes us think that we should not continue to get increases,” said Lavelle from Zurich.
The market may need to consider different program structures with additional capacity at higher tiers to provide long-term capacity to policyholders facing potential so-called nuclear dooms, Aronson said.
Insurers are asking more questions about PFAS, short for perfluoroalkyl and polyfluoroalkyl substances, which are also known as “forever chemicals,” several experts said. The substances were used in a variety of manufacturing processes but have been phased out in several countries due to health concerns.
In some cases, insurers add exclusions related to the chemicals “but it’s very account-specific,” says Petersen of McGill and Partners.
“There have been a lot more questions and a lot more scrutiny around PFAS and chemicals forever,” says Arick at International Paper. “It was kind of background noise in the past few years, but it was much more at the forefront this year.”