General liability renewals saw wide variations on Jan. 1, 2020, with straightforward primary placements seeing rates tick up, but more difficult risks experienced significant rate hikes, and many umbrella and excess placements were challenging, brokers and underwriters report.

Accounts with significant auto fleet exposures often saw big increases, and accounts exposed to other tough exposures, such as residential construction, health care and institutions with molestation and abuse claims, were also difficult to place, they say.

And umbrella and excess programs frequently were restructured in response to numerous insurers cutting back limits.

Primary general liability rates for large corporate risks remained stable at year-end with average increases ranging from flat to low single digits, said Stephen Hackenburg, chief broking officer at Aon PLC in New York.

Kieran Dempsey, Chicago-based executive vice president and chief underwriting officer at Ryan Specialty Group LLC, which operates a range of managing general underwriters, said the firm is seeing average general liability rates increases in the upper single digits. 

“The pricing is just going up based on the general market conditions,” he said.

But auto liability rates are increasing more significantly, with average rates increasing about 15%, Mr. Dempsey said. “Just the value of injuries seems to be going up.” Health care institutions, which are seeing significant increases for medical malpractice rates, are also seeing higher auto liability rates because transportation of patients carries a higher risk, he said.

General liability accounts without large auto exposures or other difficult risks, such as habitational exposures, are seeing rate increases of 5% to 10%, said Zach Mather, Birmingham, Alabama-based senior vice president, casualty at wholesaler CRC Insurance Services Inc.

But those tougher lines, which also include construction defect, consumer products, pharmaceuticals and institutions with sexual molestation claims, are seeing double-digit increases, brokers and underwriters said.

In the large casualty insurance market, insurers are still trying to catch up on price in the face of increasing losses and are raising rates, said David Perez, chief underwriting officer, North America, for Global Risk Solutions, Liberty Mutual Insurance Co.’s global commercial and specialty lines insurer and reinsurer.

“In the last two quarters, the market has firmed up, albeit it’s a niche firming phenomenon. There’s a lot of nuance in this market change,” said Tim Turner, chairman and CEO of RT Specialty, the wholesale brokerage unit of Ryan Specialty Group LLC in Chicago.

In recent results calls, several insurers have pointed to increased jury awards and settlements causing “social inflation” and have announced increases to claims reserves.

While there is no reduction in market capital, “what’s different is social inflation and the reserve adjustments that carriers are making,” Mr. Turner said. “Individual carriers can’t put up, or choose not to put up, large limits.”

One of the biggest changes in the excess liability insurance market over the past several months has been the contraction in limits available from individual insurers.

Insurers who previously offered $10 million, $15 million or $25 million as lead capacity on a liability program now only offer $5 million, said Mr. Mather of CRC.

“The pricing is not coming down that much, so now you’ve got a renewal quote that is 75% of the expiring premium, but you’ve only got 30% of the capacity, or whatever it might be,” he said.

For one recent liability renewal with a large commercial auto exposure that CRC placed, the policyholder had previously had $25 million in capacity from one insurer, but this year it had to use four insurers to obtain the same coverage and paid 50% more in premium, Mr. Mather said.

“We’ve seen the excess market, where $25 million lead umbrella was table stakes, gravitating more towards $10 million,” said Mr. Perez of Liberty Mutual.

And while $1 million umbrella attachment points over primary are still available for smaller accounts, $2 million to $5 million attachment points are more frequent for larger accounts, Mr. Perez said.

Policyholders that buy large limits are seeing significant challenges, said Mr. Hackenburg of Aon. “Companies that used to buy $1 billion or more in limits are struggling to replace those limits.”

The hardening has the potential to last for several more months and maybe years, underwriters and brokers say.

Through April and May, there will have been a full year of increases and relayering of programs, which may lead to more stabilized renewals, Mr. Mather said. However, insurers are still facing large increases in settlements and jury awards, particularly in auto cases, “so I think people are still going to keep capacity at a minimum,” he said.

Industry casualty results are likely to deteriorate throughout 2020, so prices are likely to increase for “18 months or so,” said Mr. Perez.

In reaction to the hardening, policyholders are making more use of their captives, Mr. Hackenburg said. “These large corporations have significant resources and they are making decisions about ‘is my risk priced properly in this marketplace.’”