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Auto liability, workers comp drive casualty price hikes during midyear renewals

Terms and conditions tightening as underwriters adjust limits, rates; high-hazard industries get biggest rate increases

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Auto liability, workers comp drive casualty price hikes during midyear renewals

Buyers of primary and excess casualty insurance received price hikes during the midyear renewal season, with automobile liability and workers compensation driving much of the increases.

Although rates were flat to up 5% for the majority of primary and excess casualty lines, companies in high-hazard industries — including construction, energy, trucking, railroad and pharmaceuticals — saw prices at renewal increase by 10% to 15%, depending on loss history.

Terms and conditions also have tightened somewhat as underwriters are adjusting limits and rates, especially for lines such as transportation, experts say.

Much of the casualty lines pressure is due to increasing workers compensation prices.

Warren Perkins, vice president and risk manager at Boh Bros. Construction Co. L.L.C. in New Orleans, said he expects rate increases during his casualty renewals in October.

“You can expect the (insurance) companies to be standing firm on trying to get increases on the casualty side,” Mr. Perkins said.

To keep workers comp costs down, insurers are underwriting multiline programs for buyers, said Pamela F. Ferrandino, New York-based casualty practice leader of placement at Willis North America Inc.

“Sometimes you'll see a false-positive rate trend in general liability, which is really just the carrier trying to make sure they are keeping the workers comp costs ... down,” Ms. Ferrandino said.

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Casualty rates rose each quarter last year, “and we're seeing that continue so far this year,” said Elizabeth Carabas, managing principal at Integro Insurance Brokers Ltd. in Portland, Ore. “We're continuing to see average rate increases, certainly single-digit, on average of less than 5%.”

Major underwriters of guaranteed-cost workers compensation coverage are spreading rate increases across general and auto liability to increase profitability, she said.

Renewing auto liability insurance rates have increased more than 10%, the most among casualty lines except workers comp, said Kevin Brogan, head of national product practices and special risk for Wells Fargo Insurance Services USA Inc. in Chicago.

“The casualty marketplace is being driven pretty much by the auto line,” Mr. Brogan said. “I would go so far as to say it's not firm, it's hard.”

A pure transportation risk will get rate increases starting at 10%, he said.

“We are still seeing some larger auto liability claims,” Ms. Ferrandino said of the higher frequency and severity of auto liability claims.

While telematics and other technology have provided anecdotal improvements in loss trends and data, actuaries have yet to link such data to auto liability rates, Ms. Ferrandino said.

Insurers are pushing for higher auto liability retentions and buyers are increasingly purchasing auto liability buffer policies, experts say.

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Umbrella insurers are not always comfortable sitting atop a $2 million attachment point if they are concerned about the size or type of a fleet, Ms. Ferrandino said. As a result, insurers often push up the attachment point to the level of the umbrella coverage.

Brian Winters, New York-based executive vice president of casualty for Zurich Global Corporate in North America, said that lead excess casualty insurers writing coverage for heavy transportation risks “are certainly looking for higher attachment points.

“In excess casualty, I think the markets have learned that long limits, $25 million or more, with low attachment points, $1 million or $2 million, are a recipe for losing money over time,'' Mr. Winters said, referring to heavy transportation risks. “We're seeing our competitors, and even Zurich, offering shorter limits with higher attachments.''

With casualty coverage overall, “carriers are carefully drawing the box of what they want to write based on what they know and what they don't know, and we see them very carefully parse out those risks that they're uncomfortable with,” Ms. Ferrandino said.

While loss-affected business continues to see rate increases, plentiful capacity is limiting increases, Integro's Ms. Carabas said.

Some excess liability insurers putting up more than $50 million of capacity on an account may look to increase premium levels “to manage that outlay of capital a little better,” Ms. Carabas said.

Face-to-face meetings with insurers can help buyers tell their stories and place their casualty programs, “especially if there's any changes in their risk profile from the prior year,” she said.

“The more you do to foster and build relationships and partnerships, the better position your business is going to be in when it's underwritten by the underwriters,” Mr. Brogan of Wells Fargo said.