A new report from re/insurance broker Gallagher has highlighted the key drivers of hardening market conditions that have developed over the course of 2020.
Gallagher noted that, in a traditional hard market, capital and have been capacity reduced, limiting the availability of insurance.
However, in the current marketplace, hard conditions are being driven more by the need for underwriters to make a profit underwriting versus relying on investment income.
Carriers thus remain intensely focused on underwriting discipline to ensure they secure the right terms and pricing on certain lines of coverage that have historically not performed from an underwriting standpoint.
Factors compounding this dynamic include a spike in large weather-related losses and catastrophes, historically low interest rates, and industry-wide rapid increases in Liability losses.
Gallagher also pointed to increases in the frequency and severity of ransomware claims, and of course the global pandemic and resulting economic uncertainty.
“This uncertainty is contributing to the feeling that this is a time — not unlike in the wake of 9/11 — where the market has entered into a new phase of recalibration,” Gallagher stated. “Many would call this recalibration a hard market in the U.S.”
According to Gallagher’s Fall 2020 U.S. Market Conditions Report on client rate changes in the second quarter of 2020, 89% had a property rate increase, the highest number recorded since the early 2000s.
This report also showed that 56% of clients had a decrease in Workers’ Compensation rates, while 65% experienced an increase in General Liability and 78% had an Auto Liability increase.
Additionally, 76% saw an increase in Umbrella/Excess Liability rates, 100% had an increase to their Directors & Officers rate, and cyber policy rates were also found to have increased by 5% to 20%.
“The pace of the United States’ economic recovery and the outcome of the active hurricane season could alter some of the underlying fundamentals of the current marketplace,” Gallagher stated.
“However, in all likelihood, the conditions that exist today are not changing anytime soon, and it will take carriers several quarters of re-underwriting their books of business to overcome the challenges associated with the current marketplace,” the broker continued.
“Accordingly, all market indications point to a continuation of premium increases for the balance of the year and throughout 2021.”
