Automobile
While loss experience remained challenged, rate increases moderated – with the exception of poor performing risks – as overall aggressive Primary Casualty market conditions continued. With program marketing including Workers’ Compensation and General Liability, rate decreases were more frequent than in prior quarters. Capacity was generally sufficient as insurers provided risk transfer as a differentiator when competing on larger fleet risks. Underwriters continued to carefully evaluate risk differentiation including telematics and other vehicle safety and driver training initiatives. Looking ahead, Auto Liability market conditions are expected to continue to moderate, presuming the broader market remains stable.
Casualty/Liability
The market for primary General and Product Liability as well as Umbrella and Excess Liability continued to moderate. Average rate increases were near flat. Rate decreases were achieved in some cases where there was exposure growth; however, most premiums were flat or increasing. More insurers demonstrated willingness to compete on lead Umbrella in conjunction with the Primary Casualty placement. Capacity continued to increase and was sufficient for most risks. Underwriters continued to scrutinize emerging risks, as well as growing risks. Limit increases became more common as exposures rebounded from the pandemic period and insureds have also sought to replace some capacity lost during that same time. Insurers continued to leverage coverage terms as a differentiator. Looking ahead, market conditions are expected to continue to moderate and may become highly competitive on preferred risks.
Cyber
Depending on the class of business, year-over-year improvement of controls, and previous markets’ adjustments, program and pricing changes moderated for Cyber and Tech Errors & Omissions risks toward the end of the quarter. Competition and new capacity on excess layers continued to increase and as a result, proper Increased Limit Factors (ILFs) were introduced in lieu of the automatic increases seen previously. Looking ahead with regards to Cyber coverage, insurers will continue to monitor the geopolitical environment, and to scrutinize coverage offered for critical infrastructure, systemic, correlated events, war, with some restricting coverage on either a generalized or event-specific basis. There is likely to be greater enforcement of regulatory statutes and increasing regulatory governance globally. Competitive forces will continue to impact the market. Insurers are expected to differentiate risks, offering potential additional capacity and dropping attachment points according to specific risk profiles.
Directors and Officers
Market conditions continued to ease as new capacity made an impact in excess layer ILFs and created pressure on incumbent pricing, and expanded appetite and competition in the primary space provided more alternatives. While downward pricing continued, especially for risks that experienced inflated pricing in recent years, pricing remained challenged for risks in some industries (e.g., Electric Vehicles, Crypto). Core underwriting metrics continued to drive risk evaluation, with a focus on board and management execution success as well as ESG planning and implementation. Looking ahead, underwriters will closely monitor the macro-economic and political environments and their potential impacts on corporate risk. Favorable market conditions will continue for most risks, with decreases achievable through strategic marketing efforts and utilization of new market capacity. Risk differentiation will remain key to achieving superior outcomes, with ESG, financial strengths and management being central themes.
Property
Upward pressure on pricing continued, especially for challenging occupancies such as frame habitational, food, molten materials and forest products. Underwriter focus on valuations intensified; updated replacement cost valuations were mandated and insureds were required to explain their historical and current approaches to determining valuations. Restrictive terms were applied if replacement costs were deemed inadequate. Exposure increases supported lower rate increases in some cases on primary layers but tended to drive increases on excess layers. While capacity was generally sufficient, some insurers limited their line sizes due to the impact of valuations on overall portfolio exposures (i.e., increased MFLs and accumulation issues for CAT perils). Looking ahead, market conditions are expected to become more challenging as insurers react to the impacts of Hurricane Ian, further inflationary pressure on exposure values, and January 1 treaty renewals.
Trade Credit
Loss ratios remained below historical averages. Capacity remained abundant and premium rates were unusually low as insurers sought growth. While appetite remained limited for higher risk sectors like aviation and retail, it expanded in areas such as FinTech and payment processing. Inflation continued to push credit limit needs higher and the market generally met the increased demand. New players continued to expand the definition of ‘standard’ coverage offerings. Looking ahead, headwinds from Europe's energy crisis and global inflation may impact the market by leading underwriters to move in a more conservative and cautious direction.
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