Geography Trends Q2 North America

United States

Market Dynamics

Q2 Automobile Summary

Overall (Moderate)

Auto Liability remained challenged, although competitive pressure on Primary Casualty programs kept rate increases moderate.

Pricing (+1-10%)

Rate increases were generally modest for primary Auto Liability risk transfer. Auto fronting fees remained flat. Where vehicle counts grew, rates were reduced as insurers sought to maintain or grow premiums.

Capacity (Ample) Most insurers have maintained capacity levels since 2021. Some have differentiated their position in the second quarter of 2022 by offering more risk transfer capacity for primary Auto Liability than in recent years.

Underwriting (Prudent) Underwriting remained generally stable. Insurers continued to evaluate insureds’ use of vehicle safety technologies, including telematics, as part of the underwriting process.

Limits (Flat) Flat limits were generally available, and most insureds opted to keep limits “as is”.

Deductibles (Flat) Most deductibles remained flat in Q2, although in select cases deductibles moved lower or higher.

Coverages (Stable) With Auto Liability highly regulated under state laws, there was little variation in coverage for primary policies.

A Look Ahead (Moderate) Market conditions are likely to continue becoming more competitive; however, insurers are expected to seek modest rate increases in line with inflation and loss trends.

Q2 Cyber Summary

Overall (Challenging)

The market environment remained challenging, with significant rate increases, limited capacity and rigorous underwriting. Cyber and Tech Errors & Omissions risks experienced significant program adjustments, including to pricing, retentions, coverages and capacity, in a trend that has lasted well over a year. For June 2022 renewals depending on the class of business, year-over-year improvement of controls, and previous markets’ adjustments, program changes were not as drastic as had been experienced earlier in the year.

Pricing (>+30%)

Significant rate increases continued, but varied based on class of business, segment, controls, loss trends and prior pricing adjustments. In general, pricing reflected ransomware-related losses and insurer concerns regarding systemic, correlated risks. Competition on excess layers led to the implementation of proper Increased Limit Factors (ILFs), in contrast to the automatic increases seen previously.​

Capacity (Constrained) New capacity entered the market, primarily in the high excess layers, but capacity remained constrained overall, and global aggregate capacity remained a key area of focus. Class of business, attachment point, and cybersecurity control posture were key factors in determining capacity deployment.

Underwriting (Rigorous) Underwriting rigor and extensive information requests continued, including collection of biometric information in some cases. The underwriting process was extended due to escalations and referral underwriting. For larger and more complex risks, many insurers required an underwriting meeting in addition to a written submission, and supplemental applications have become common. Insurers remained focused on underwriting to ransomware controls, and if the required underwriting information was deemed inadequate, ransomware-related coverage was not offered or was offered subject to sub-limits and/or coinsurance. Insurers closely scrutinized exposures in Russia, Ukraine and Belarus.

Limits (Flat) Alternative risk transfer strategies such as captives, fronted arrangements and increased self-insured retentions have become important levers to help offset lost capacity.

Deductibles (Flat) For most placements, especially those in the middle market space, if a retention increase occurred in 2021 (including longer waiting periods for business interruption/systems failure), expiring deductibles could be achieved in Q2 2022, unless the insured had a control issue or requested alternative options. ​

Coverages (More Restrictive) Insurers continued to scrutinize the coverages offered for critical infrastructure, systemic and correlated events, with some insurers restricting coverage on either a generalized or event-specific basis. For dependent business interruption/systems failure, some insurers imposed sub-limits and/or added coinsurance provisions. Insurers have closely monitored the geopolitical environment, particularly focusing on potential increases in cyber claims related to the geopolitical events in Eastern Europe. As a result, insurers have reviewed and, in some cases, amended their war, sanctions and territory coverage conditions. Certain insurers have also sought to remove non-core Cyber coverages (full media, cyber-crime and previously sub-limited coverages). Excess insurers have reviewed all sub-limits, regardless of attachment, with many no longer offering followed/drop down coverage when the underlying limit for these coverages has been eroded. Insurers have also continued to emphasize cyber incident response panel arrangements, including the use of pre-arranged vendors.​​

A Look Ahead (Challenging) Cyber and Tech E&O insureds saw significant program corrections (premium, retention, coverage, capacity, etc.) through 2021 and most of the first half of 2022. Depending on the class of business, year-over-year improvement of controls, and previous markets’ adjustments, program changes during the second half of 2022 may not be as drastic as have been recently experienced. Insurers will continue to monitor the geopolitical environment, and to scrutinize coverage offered for critical infrastructure, systemic and correlated events. There is likely to be greater enforcement of regulatory statutes and increasing regulatory governance globally. Rate increases are expected to continue in the second half of 2022, but competitive forces may pressure pricing downward. Insurers are expected to differentiate risks and price according to specific risk profile. While some new capacity has entered the market, it is primarily in the higher excess layers and is driving competition in those layers. Having been significantly adjusted over the past two cycles, current retention levels are expected to continue.

Q2 Employers Liability/Workers Compensation Summary

Overall (Soft)

Workers Compensation has continued to be profitable for insurers, encouraging competition. This means that only nominal increases, if any, have been realized in most cases. ​Many insureds experienced decreased pricing.

Pricing (Flat)

Most rates were nearly flat, with any increases or decreases generally small. Increases tended to be seen where payrolls were reduced. ​

Capacity (Ample) There was more competition for Workers Compensation business in Q2 than in the recent past. The marketplace for Excess Indemnity insurance for Texas Non-Subscribers, however, became more constrained. ​

Underwriting (Flexible) For Workers Compensation and Employers Liability loss-sensitive programs, insurers generally focused on loss history and loss rates, aiming to develop programs that would be attractive to clients while profitable for the insurer. ​

Limits (Flat) Statutory limits dominate the Workers Compensation space. In some cases, Umbrella insurers required higher Employers Liability limits. Most, however, remained flat. ​

Deductibles (Flat) Most clients chose to maintain existing deductible levels. ​

Coverages (Stable) Workers Compensation coverage is highly regulated under state statutes, so coverages saw minimal variation. Employers Liability coverage was generally stable.​

A Look Ahead (Soft) The market for primary casualty programs with a large Workers Compensation component is likely to be extremely competitive, depressing rates regardless of prevailing inflation trends.

Q2 Trade Credit Summary

Overall (Soft)

Driven by low loss ratios, the soft market trend continued in Q2 as capacity further expanded through new market entrants as well as an expansion of appetite and product offerings by current insurers in this space.

Pricing (Down)

Ongoing favorable portfolio performance and intense market competition continued to drive competitive pricing.

Capacity (Abundant) Favorable performance and healthy competition led to abundant capacity in this space.

Underwriting (Flexible) Underwriting was flexible as insurers competed to retain and grow their portfolios.

Limits (Increased) Increased credit limits were mainly driven by the inflationary environment, but also by insureds expanding the scope of their portfolios.

Deductibles (Decreased) Deductible decreases were available as a result of favorable performance in this space and healthy market competition.

Coverages (Broader) Strong market competition drove insurer flexibility with coverage terms and policy wording.

A Look Ahead (Moderate) Upcoming headwinds driven by inflationary pressure are expected to moderate current market conditions.

Q2 Casualty/Liability Summary

Overall (Moderate)

The market for primary General Liability and Umbrella and Excess Liability lines continued to moderate in Q2. As exposures have grown, many insureds experienced increasing premiums despite flat or very modest rate increases. ​

Pricing (+1-10%)

Despite very modest price increases, given the growth in exposures, premiums did not generally decrease. Increasing competition also helped to temper rates.​

Capacity (Ample) Capacity increased in the Umbrella and Excess Liability lines as a result of new insurers entering the space, increased incumbent capacity, and new facilities.​

Underwriting (Rigorous) Underwriters continued to ask more questions about key risk areas including per- and polyfluoroalkyl substances (PFASs), wildfire exposure, and exposures relating to the geopolitical situation in Eastern Europe. ​

Limits (Flat) Most risks maintained the same level of limits, although some sought increased limits as more favorable Excess Liability options became available. ​

Deductibles (Flat) While many insureds evaluated attachment point options, deductibles and attachment points of Excess coverage tended to remain at the same level. ​

Coverages (Stable) Coverages remained generally stable, although exclusions relating to the geopolitical events in Eastern Europe became more common. ​

A Look Ahead (Moderate) With increasing competition, market conditions are expected to continue to improve in the near term. Potential recessionary macroeconomic conditions could change market conditions if growth slows and exposure reductions occur.​

Q2 Directors and Officers Summary

Overall (Moderate)

Market conditions have continued to ease because of new capacity entering the market combined with increased appetite from incumbent insurers. Competition was more persistent on excess layers as compared to primary layers. Minimum Increased Limit Factors have decreased meaningfully. ​

Pricing (Down)

Pricing overall was flat to slightly down; however, renewals of newly public companies (with higher price points) experienced more significant percentage decreases. The market for new public listings remained challenged with more limited capacity and higher price points. Primary placements experienced flat to very modest increases while excess layers saw more competition due to the increased supply of capacity and an improved appetite among incumbent insurers. While pricing was down modestly overall in Q2, there was a lot of variation depending on risk and market segment.

Capacity (Ample) New capacity entered the market over the last 18 months and this has impacted pricing, predominantly on the excess. Insurers remained measured about capital deployment, with muted appetite for limits over USD 10 million on any layer. There were select opportunities for multi-year options. ​

Underwriting (Prudent) Core underwriting metrics applied, with risk differentiation resonating at all levels. Underwriter meetings remained valuable, if not a necessity, to highlight corporate positives and explain headwinds. ESG remained a hot topic, with the “G” (Governance) a predominant topic. Execution in a volatile environment was also a key underwriting metric, given all of the risks prevalent in the system (recession fears, inflation, Russia/Ukraine, supply chain, COVID-19 claims, ransomware attacks, etc.)

Limits (Flat) Limits remained flat, but ample capacity remained for insureds to increase, if desired.

Deductibles (Flat) Expiring deductibles could be achieved in most cases, with some decreases available if heavily weighted in the preceding two years.​

Coverages (Stable) Broad coverage terms could be maintained and achieved in most cases.

A Look Ahead (Moderate) The market will remain watchful, given the current risk environment. Portfolio stabilization, combined with new market entrants, has increased competition, which is expected to continue. Some of the headlined risk sectors such as De-SPAC, Crypto, Cannabis, Electric Vehicle and recovering COVID-impacted industries (particularly those related to supply chain disruption) are likely to remain challenged. Environmental, Social and Governance factors will remain crucial for underwriters, as they consider the value of ESG ratings for underwriting metrics. Insureds’ ESG maturity and plans for achieving disclosed targets are expected to remain a focus amongst insurers. ​Newly public companies with higher price and retention levels will experience increased competition due to improved appetites and desire to grow.

Q2 Property Summary

Overall (Moderate)

Rates increased again in Q2, driven by supply chain risk, reinsurance price increases and increased climate risk exposures, even as capacity expanded for some well-performing risks. Recent losses have cast a spotlight on valuations as, in some cases, losses exceeded values reported. This has led to greater scrutiny from underwriters with impacts on capacity, coverage sub-limits and pricing.

Pricing (+1-10%)

Although insurers generally made an underwriting profit, the Property portfolio continued to underperform, and as a result, rate increases continued. The amount of increase varied; well-performing risk classes often experienced flat renewals, while more challenged risk classes often experienced rate increases. Overall, rate increases were modest, while premiums grew more significantly due to increasing property values.

Capacity (Ample) There is wide market variation between desirable and undesirable (e.g., Wildfire and Florida Wind) risks, with the former experiencing over-subscription in some cases while the latter experienced capacity constraints. Because challenging risks were often not written in the direct market, Excess and Surplus Lines capacity was in high demand in Q2. Rising property values have led to some reduction in capacity, since insurers have seen increased aggregate exposures and modeled portfolio loss potential.

Underwriting (Prudent) Ongoing supply chain issues led to heightened underwriting conservatism related to Contingent Business Interruption; exposures were highly scrutinized, and coverage was limited in some cases. Some underwriters have imposed margin clauses (which tie limits to reported values), coinsurance penalties, or occurrence limit of liability endorsements to protect insurers from the under-reporting of values in the event of a loss.

Limits (Flat) Expiring limits were achieved in most cases; however, as Maximum Foreseeable Losses increased on some of the more challenging risks, some insurers sought to reduce their limits. Insurers have imposed location limits of liability or margin clauses on risks deemed to have inadequate values. Contingent Time Element remained challenging and some insurers have reduced line sizes or repositioned attachment points.

Deductibles (Flat) Expiring deductibles were achieved in most cases, although some higher risk occupancies and/or poorly-performing risks experienced increases.

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

A Look Ahead (Moderate) The level of hurricane activity is expected to be a significant factor impacting the Q3 2022 market. Rate pressure may continue to moderate overall, but may be at least partially counteracted by inflation, supply chain risks and climate change. In addition, catastrophe exposures increase as valuations rise, leading insurers to use more of their aggregate limit on renewals and so they may have less capacity available for new risks. Underwriter focus on Probable Maximum Losses and Normal Loss Expectancy may sharpen, especially related to potential impacts from increases in exposures due to supply chain issues and the rising cost of goods. Insurers may consequently reduce line size or reposition attachment points on programs.

EMEA and the UK: Regional Market Dynamics

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