A new report by US independent brokerage WoodRuff Sawyer contends that hopes for stability in the insurance and reinsurance market next year have “all but disappeared” in the wake of Hurricane Ian and the myriad economic challenges facing the industry.
WoodRuff Sawyer’s 2023 Property & Casualty Looking Ahead Guide notes that factors such as the current inflationary period, the war in Ukraine, and ongoing supply chain issues have offset any previous stabilising trends with more economic uncertainty.
As a result of these factors, property premiums are rising again and casualty lines are on the uptick, albeit at a slower rate.
Additionally, inflation, supply chain constraints, secondary-peril losses, and a challenging reinsurance market are all contributing to a hardening of the commercial property insurance market in 2023, analysts warned.
“Before Hurricane Ian, there was some hope commercial property rates would stabilize, and, in some cases, insureds would obtain rate reductions,” they wrote. “Post-Ian, that hope has all but disappeared.”
Over the past three years, many property carriers adjusted their portfolios, reduced line sizes, altered terms and conditions, and sought to achieve technical rate adequacy, which was considered to have added more stability to accounts.
But with so many challenges now facing re/insurers, WoodRuff Sawyer expects there to be significant focus on retaining and ceding risk in 2023, with alternative options such as parametric insurance needing to be explored.
The broker anticipates that carriers will continue to monitor adequate values, and a heightened focus will be on business income and continuity. Risk management will also prove pivotal, it added, and insureds and brokers will need to strategically determine how to best internally allocate or externally rent capital.
In terms of rate change projections for property lines in 2023, WoodRuff Sawyer predicts increases of 0-5% for non-cat business and 5-10% for cat business, provided this business has a favourable loss history.
For business with unfavourable loss history, the firm projects rate increases of 15% for non-cat business and of 30%+ for heavy cat business.
The report also notes that the outlook for casualty lines in 2023 remains difficult as well, as social inflation including heightened litigation, third-party investment in lawsuits, and increased liability verdicts and settlements continue to strain insurer competition and increase rates.
