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Commercial markets continue to harden in Q2: USI

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Commercial insurance markets have continued to harden in the second quarter as many lines have seen double-digit rate increases, according to a market update released Tuesday by USI Insurance Services Inc.

Casualty markets have seen some of the steepest increases, as umbrella and excess liability for middle-market accounts have risen 10% to 50%, while risk management accounts are up 25% to 100%, according to the report. Total capacity is down at least 25%, and there are requirements for higher underlying attachment points, USI said.

Primary general and product liability has risen more modestly at 5% to 10%, as auto markets have continued to see double-digit increases. “Rate increases are common for most insureds across most industries. Capacity constraints as a result of markets exiting this line has also put pressure on rates,” USI said.

Primary auto liability for fleets of fewer than 200 vehicles with good loss history is up 10% to 20%, while cover for fleets of fewer than 200 vehicles with poor loss history has risen 20% to 30% or more.

Cover for fleets of more than 200 vehicles is up 20% to 30% or more, and excess auto buffers have risen 40% or more, USI said.

Workers compensation continues to be the outlier, with guaranteed cost coverage down 5% to up 5%, and loss-sensitive coverage flat to up 5%.

“The new norm continues to be rate increases, more selective deployment of capacity, and reductions in capacity in the primary and umbrella/excess liability market,” USI said in the report. “Tighter underwriting standards coupled with a continued exodus of capacity for certain classes of business and coverage lines have accelerated in the past 3-4 months. We do not see these trends abating in the near future; in fact, we anticipate they will remain throughout 2020 and into 2021.”

Property accounts with good loss history and without catastrophe exposures saw increases of 5% to 15%, while those with catastrophe exposures and minimal loss history rose 20% to 40% or more, the report said. Property with both poor loss history and catastrophe exposures were up 40% or more, USI said.

Lines are also being pared, as “underwriting based on profitability is driving reduced capacity utilization decisions,” the report said.

Increasing reinsurance costs are also helping drive property increases, “especially as it relates to the availability and cost of hurricane, earthquake and flood capacity,” the report said.

Public company directors and officers coverage has risen dramatically in the quarter, up 25% to 75%, while private company and not-for-profit D&O insurance was up more modestly at 10% to 50%, USI said, adding increases are likely to continue.

“The public company D&O marketplace continues to harden, with the economic impact from the COVID-19 pandemic hastening the pace. The significant premium increases seen in the last six months of 2019 did not abate in Q1/Q2 of 2020. We do not anticipate any change of course for the rest of 2020. In fact, an acceleration is likely,” USI said.

Employment practices liability insurance rates have risen 10% to 50% and professional liability/errors & omissions coverage is up 15% to 50%.

In a statement released with the report, the brokerage noted the effect of the pandemic.

“While it is too soon to determine the full impact of COVID-19 on the property and casualty insurance industry, it is apparent that the economic impact has started to manifest itself in the insurance market with decreased exposures, such as payroll, sales and inventory,” USI said in its statement.