Global insurance and reinsurance brokerage, Willis Towers Watson (WTW) expects 19 lines of business to see price increases in 2020 in what the firm describes as the “biggest upward price shift in years.”
The broker has released its 2020 Insurance Marketplace Realities report, which concludes that North American commercial insurance buyers can expect rate increases in 2020 for more lines, many of which will be sizeable.
Unsurprisingly given recent loss activity, WTW is predicting that in the property segment, catastrophe-exposed lines with losses, such as U.S. and Japanese wind, will experience the most dramatic rate rises of between 15% to 30% or more. This is followed by cat-exposed risks at 10% to 20%, and then non cat-exposed risks at 5% to 15%.
Joe Peiser, global head of Broking at WTW, commented: “We’re seeing the biggest upward price shift in years. We expect rate hikes and capacity constrictions will continue throughout 2020 and likely into 2021, but a more orderly market to emerge by mid-2020.
“Nevertheless, as the market seeks equilibrium, there are reasons for optimism: The alternative capital market is showing renewed enthusiasm for reinsurance; the overall industry has more capital than ever; insolvencies are a rarity; InsurTech is working with market participants to improve the client experience, and the laws of supply and demand still apply. This challenging market won’t last forever.”
In the casualty space, the re/insurance broker is expecting rate increases of up to 20% in umbrella lines, while excess is likely to see increases of 15% or more. Auto lines are expected to rise by 6% to 12% and general liability by as much as 7.5%. Offsetting the positive trend, workers comp rate predictions are -2% to +2%, while international lines are expected to be down 5% to flat in 2020.
WTW underlines a number of factors that are driving the firming market, which includes the lower for longer interest rate environment, and extreme and costly catastrophe events since 2017.
“There’s work to be done in the short run to avoid the worst of the rate hikes. Buyers should allot plenty of time to work with their advisers, provide robust risk information to potential risk takers, consider options across the global marketplace and take advantage of analytic tools. They should also continue to invest in risk control measures. The cheapest loss is the one avoided.
“In the long run, we urge risk professionals to keep an ear to the ground on the topic of climate risk, which may soon have an impact on the valuation of every business,” said Peiser.
Outside of property and casualty, and WTW predicts that in 2020, all business lines within the executive risks segment will experience rate increases, with the most pronounced occurring in D&O public company and D&O private.
Cyber lines are expected to be flat to up 10% next year, while terrorism and political violence lines are likely to be flat. In environmental, WTW predicts that all lines will experience rate movements of between -5% to +15% in 2020.
