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Commercial rates continue to rise amid hardening market

rising chart

Commercial insurance markets are seeing continued rate increases as catastrophes and the COVID-19 pandemic exacerbate already-hard market conditions across most property/casualty lines, according to a report released Thursday by USI Insurance Services LLC.

However, businesses can take major steps to improve their risk profiles, reduce costs and increase profitability, the report said.

On top of price increases, most lines of business are seeing increased deductibles, reduced capacity, changes in coverage and restrictions in terms and conditions at mid-year.

Property lines are seeing rate increases of 5% to 20% or more, depending on loss history and catastrophe exposure. Property owners can help reduce their insurance costs by maintaining low attritional loss levels and presenting loss mitigation strategies to insurers, USI said.

The winter storm that affected the South-Central part of the U.S. is projected to generate approximately $20 billion in losses, making it more difficult for property insurers to achieve profitability, the report said.

Policyholders that experience moderate to high claims and loss costs in 2021 will continue to see hard property market conditions, with increases of more than 20%, USI said.

Primary general casualty and product liability are up 10% to 20%, while umbrella/excess insurance is still the most challenging casualty market, with rate increases of 15% to 25%.

However, some policyholders in more hazardous industries or with prior loss experience continue to see high-double-digit and, in some cases, triple-digit rate increases year-over-year, USI said.

The cyber market has gone from hardening to “historically hard,” given the unprecedented number of recent losses, including the spike in ransomware incidents, the report said.

Network security and privacy liability cyber coverages are up from 50% to 100% for less optimal risks.

Packaged policies that include cyber coverage, primary and excess layers are seeing increases of 25% to 50%, depending on loss history.

Public company directors and officers liability remains challenging with rates up 10% to 50% but improved from the 20% to 100% increases seen in the latter part of 2020. While the marketplace has shown signs of relative stability this year, an exception is companies completing initial public offerings, especially SPACs.

These IPOs are all seeing premium and retentions well above established publicly traded companies, USI said in the report.

In other lines of executive and professional insurance, premium increases continue across the board, ranging from 5% to 75%.

Workers compensation coverage ranges from flat to up 5%, and, as more employees return to the workplace, the recent declines in claim activity and frequency should change.

The pandemic’s repercussions include many new risks and insurance issues on top of the old ones, the report said. “As businesses reopen, employees will return to a different workplace, both physically and culturally, and companies will face a different risk landscape,” USI said.

More insurance and risk management news on the coronavirus crisis here.