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Liability rates still falling in most areas


Many organizations are seeing decreases in their commercial liability coverage at midyear renewals, but there are distinct exceptions.

“Probably with the exception of New York-area construction, the market is still very soft,” said Frank Scott, senior vice president of USI Insurance Services L.L.C. in West Orange, New Jersey. “Rates are down, depending upon the account, high single digits into the double digits. New York construction continues to be a challenge, with increases growing into the low double-digit mark. And the market is also contracting there.”

Mark Moitoso, senior vice president and analytics practice leader at Lockton Cos. L.L.C. in Kansas City, Missouri, had a similar view.

“I think when you have ample capacity, there's competition” for new and renewal business. “Broadly speaking, we still continue to see a downward trend in most lines of coverage, with the exception of commercial auto.”

“In general, it's a flat market,” said Joseph Peiser, executive vice president and head of casualty broking at Willis Towers Watson P.L.C. in New York. “So most accounts are either renewing as is” with slight increases or decreases, depending on their exposures.

“The exceptions are truckers, companies with large fleets of vehicles and energy companies, particularly energy companies that are in exploration” for new sources, he said.

Mr. Peiser said the trucker and large-fleet increases are due to an uptick in both personal and commercial vehicle losses.

“All insurers are telling us the same story,” he said. “New York City construction is also what we call a tight market that is driven entirely” by the state Scaffold Law, “which drives many workers comp losses to be general liability losses. So that's a unique statutory issue.”

Otherwise, general liability “clients who have had loss issues and done nothing to mitigate them are going to see some challenges,” he said. “They're not going to get the advantage of good rates.”

“While we say the market is soft and competitive, the companies that continue to have the best risk management programs and the best loss histories are getting the best terms and conditions in the marketplace,” Mr. Moitoso said. “Those that have poor loss histories and not the best risk management processes in their organization will always struggle to find the best terms and conditions because that's how the underwriting community responds.”

Mr. Peiser said outside of automobile losses, the frequency of general liability losses is decreasing.

“A lot of the loss-control measures that have been pushed for the last 20 years are actually having an effect,” he said, citing improved ergonomics and safety signage around maintenance work as examples.

USI's Mr. Scott said buyers are aware of what's going on in the market.

“The educated buyer is looking at what they can get from the marketplace. They're talking to their brokers and, where possible, they're wrapping their renewals early in favorable terms,” Mr. Scott said.

Most buyers “are looking for alternatives,” Mr. Peiser said. “They may not move (to a different insurer), but we're seeing a significant uptick in marketing of their programs.”

Cyber blind spots

While more buyers are purchasing cyber coverage amid a growing number of hacking events, they're still not buying enough limits, Mr. Scott said.

“Even with the rise of cyber extortion, which is actually a big area now, as well as the social engineering, everybody thinks they have their systems locked down, and are not purchasing the coverage. It's amazing,” he said.

John Lucker, global advanced analytics and modeling market leader at Deloitte Consulting L.L.P., said insurers can use cyber coverage to differentiate themselves.

“It's not just about selling cyber insurance coverage,” he said. “It's about establishing relationships with service providers and selling cyber remediation services or cyber assessment services or cyber security services.”

Mr. Peiser said he believes general liability market pricing will change only with a dramatic shift in loss trends.

“It would need to be a mass tort along the lines of an asbestos or environmental — like we experienced in the mid-'80s — that comes out of nowhere,” he said. “Absent that ... I think it's going to be more of the same next year.”