Geography Trends Q2 North America


Market Dynamics

Q2 Automobile Summary

Overall (Moderate)

The market transition that began in Q1 continued in Q2, with more moderate rate increases and generally stable conditions. Much-needed new capacity entered as insurer appetite expanded.

Pricing (+1-10%) While price increases remained modest, the transition in some parts of the country to Direct Compensation for Property Damage (DCPD) has led to pricing conservatism as subrogation of no-fault losses comes to an end.

Capacity (Ample) With new capacity entering the market, insurers demonstrated stronger interest in quoting and capacity was generally available. However, higher-risk exposures such as hauling hazardous goods/fuel, US-exposed risks and public passenger risks continued to experience capacity constraints.

Underwriting (Prudent) Detailed underwriting information remained important, and safety and driver controls continued to be required in underwriting submissions.

Limits (Flat) Limits remained largely stable, with excess insurers still seeking a minimum of CAD 5 million for primary Auto coverage.

Deductibles (Flat) Expiring deductibles were achieved in most cases.

Coverages (Stable) Expiring coverages were achieved in most cases.

A Look Ahead (Moderate) Insurer focus on growth is expected to temper upward rate pressure; however, some modest rate increases are likely, especially in Alberta, as a result of the transition to DCPD.

Q2 Cyber Summary

Overall (Challenging)

Systemic economic cyber risk and aggregate impacts continued to be a key concern for carriers, and market conditions remained challenging. Underwriting remained rigorous, and active applicant participation continued to be required. A focus continued on risk control and cyber security mitigation and resiliency; however, strength in these areas did not mean that rate increases, higher retentions and coverage restrictions could be avoided.​ Insurers guarded against large widespread events by implementing further coverage restrictions and imposing sub-limits on ransomware and Contingent Business Interruption coverages.

Pricing (>+30%)

Significant price increases continued due to increasingly negative loss results and the continued threat of ransomware events.

Capacity (Constrained) Insurers were conservative in capital deployment, focusing on aggregation across geographies, limiting exposures within industries and limiting exposure (via lower limits) on any one risk.

Underwriting (Rigorous) Underwriters remained focused on risk control and mitigation measures, requiring ongoing participation from applicants; e.g., responding to underwriter questions, presenting risks to insurers. ​

Limits (Decreased) Availability of capacity resulted in limit decreases in many cases and, in some instances, insureds reviewed limit options as a mechanism for managing total cost of risk. ​

Deductibles (Increased) Deductible increases were common and often based upon the insured’s investment in mitigating and managing their Cyber exposure.

Coverages (More Restrictive) Coverages tied to significant claims activity (ransomware), Cyber exposure management and geopolitical uncertainties remained under significant pressure.

A Look Ahead (Challenging) While a flattening is certainly not expected, previous portfolio vetting and adjustments imposed to pricing, limits, deductibles and coverages are expected to create a more moderate environment later in 2022.

Q2 Property Summary

Overall (Moderate)

Market conditions continued to improve in Q2. Price increases moderated and additional capacity became available as insurers sought to retain and grow their portfolios. However, for poorly performing risks or higher-risk types (e.g., Natural Catastrophe-exposed risks), capacity remained limited and rate increases were more significant. Systemic losses and aggregate impacts on the Property market overall continued to be a key concern for insurers and some managed their Natural Catastrophe exposure by reducing capacity, and/or imposing moratoriums for risks in areas prone to wildfire.

Pricing (+1-10%)

Modest rate increases continued, although in some challenging classes such as timber frame or unprotected property, and poorly performing risk types, rate increases were more significant.

Capacity (Ample) While some insurers continued to reduce capacity, appetite generally increased. Capacity remained limited for Natural Catastrophe exposures, especially in British Columbia.

Underwriting (Prudent) Insurers continued to seek detailed information in order to provide terms. There was a strong focus on valuations and inflation, as risk details and engineering continued to drive decisions. Insurer growth ambitions have been evident during renewal negotiations.

Limits (Flat) Limits were generally stable, with some variation depending on class of business and segment. Contingent Business Interruption exposures (CBI) were scrutinized, and underwriters were reluctant to offer large blanket limits for CBI given inflationary pressures and supply chain disruptions.

Deductibles (Flat) Expiring deductibles were achieved in most cases, with higher deductibles imposed on a case-by-case basis, especially on earthquake risks on the West coast.

Coverages (Staple) Expiring coverages were achieved in most cases but in some cases, such as Natural Catastrophe risks on the West coast, at a higher cost.

A Look Ahead (Moderate) Current market trends are broadly expected to continue, although inflationary pressures impacted claims and are expected to lead to more scrutiny of valuations.

Q2 Casualty/Liability Summary

Overall (Moderate)

Following the Q1 trend, market conditions were generally stable; however, challenging conditions continued where there was significant US exposure or material claims activity, and in certain industry segments. Umbrella and Excess layers experienced more cautious underwriting and limit deployment as compared to Primary coverages. Additional capacity has driven some program restructuring.

Pricing (+1-10%)

Pricing increases were generally flat to moderate, driven largely by loss experience and attachment point. Umbrella and Excess increases were slightly higher, especially for risks with underlying US Auto exposures and/or other significant US exposure.

Capacity (Ample) Favorable underwriting results led to increased capacity, which was deployed selectively, i.e., Canadian companies with material US exposures generally experienced more conservative deployment due to substantial increases in US litigation costs and nuclear verdicts observed in recent years. Oil sands capacity remained a critical concern as more insurers restricted their writing in this sector to demonstrate movement on their climate agendas.

Underwriting (Prudent) While underwriting was generally prudent, it was more conservative and rigorous related to renewable energy and heavily US-exposed risks. Underwriters continued to request detailed information in line with requests from the last two renewal cycles.

Limits (Flat) Expiring limits were achieved in most cases. Despite exposure growth, increased limits were not pursued, likely driven by continued COVID-19 financial recovery efforts and current pricing levels.

Deductibles (Flat) Deductibles were deemed by insurers to have reached sufficient levels following adjustments made during the past two renewal cycles. Increases were reserved for risks experiencing continued frequency or severity issues despite past adjustments.

Coverages (Stable) Adjustments over the past two renewal cycles have largely addressed insurer coverage concerns. Issues remained; however, for risks with operations in areas at risk of wildfire. Consequently, heading into the fire season, insurers targeted sub-limits for fire-fighting expenses. New exclusions were also added, such as those around per- and polyfluoroalkyl substances, and exclusions relating to geopolitical events in Eastern Europe.

A Look Ahead (Moderate) The market’s outlook is moderate to challenging due to uncertainty around global issues and the beginning of wildfire season. Increased revenue for many insureds due to the reopening of operations is likely to drive up pricing and insureds’ demand for options.

Insureds with average activities may see rates for primary and excess liability coverage softening due to increased competition among insurers, although this will be less pronounced for risks with significant US exposures or challenging classes of business.

In the Excess market, capacity is likely to increase, and rates should stay flat. For more challenging risks, capacity with incumbents is expected to remain stable and rate increases are likely to be minimal due to insurer retention budgets. As a result of portfolio profitability, additional insurers are expected to offer capacity, which should help to mitigate increases.

Q2 Directors and Officers Summary

Overall (Moderate)

The transition of the Canadian D&O market has accelerated; pricing has flattened, capacity is sufficient, and underwriting has become more flexible.

Pricing (Flat)

Pricing has been generally flat or has seen light increases in Q1, particularly within the private and not-for-profit sectors. However, within the public sector rates tended to decrease.

Capacity (Ample) Capacity was sufficient for most risks.

Underwriting (Flexible) Underwriting was more flexible as the transition has accelerated.

Limits (Flat) Limit management strategies were deployed to control insurer exposure to increasing defense costs, especially for US risks. While policy limits remained generally stable, the reduced cost of capacity led to limit increases in some cases.

Deductibles (Flat) Expiring deductibles were achieved in most cases, while decreases were achieved on a case-by-case basis.

Coverages (Stable) Coverage was generally stable; however, exclusions related to the geopolitical events in Eastern Europe continued.

A Look Ahead (Soft) A continued transition to more moderate market conditions is expected, as insurers focus on their growth agendas in the context of fewer IPOs, SPACs and RTOs.

Q2 Trade Credit Summary

Overall (Moderate)

The market continued to moderate in Q2. Conditions improved due to increased competition, lower than expected loss ratios, and expanded appetite and product offerings.

Pricing (Flat)

Pricing overall was flat in Q2, although rate trends continued to vary widely depending on industry sector. Some well-performing risks and industries experienced modest rate decreases while challenged risks and industries experienced more significant increases.

Capacity (Ample) Capacity was sufficient for small to mid-sized business. Insurers were selective about where capacity was deployed and demonstrated an increased interest in syndicating with other insurers when capacity was constrained.

Underwriting (Flexible) Insurers' focus on retaining and growing their portfolios was evident in their underwriting approaches; however, this was tempered by economic uncertainty, which led to insurer conservatism and requests for more detailed underwriting information.

Limits (Increased) Limits continued to increase, driven primarily by restocking efforts and inflation-driven price escalation.

Deductibles (Flat) Expiring deductibles were achieved in most cases although some poor-performing risks and industries accepted an increase in deductibles in order to manage premium costs.

Coverages (Stable) Expiring coverages were achieved in most cases.

A Look Ahead (Challenging) Geopolitical events in Eastern Europe are expected to continue to fuel economic uncertainty and may hinder global recovery. Insurers may shift appetite and underwriting approaches to counter the effects of high inflation, increased commodity prices, financial market volatility, and slower economic growth.

United States Market Dynamics

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