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Liability limits expand as rate hikes moderate


Rate increases for general liability and umbrella coverage moderated in the first half of 2022 to low double-digit price hikes as more capacity entered the sector, industry experts say.

Limits available are constrained but increasing, they say.

While percentage increases have come down from the high double-digit and triple-digit increases of the past few years, some difficult placements, such as commercial auto, remain.

Midyear increases for primary general liability averaged in the high single-digit percentages, said Chris Kopser, New York-based president and chief underwriting officer, primary casualty, for the Americas at Axa XL, a unit of Axa SA.

Rate increases in the excess liability markets have been on a “roller coaster ride” over the past few years and are now in the upper single-digit percentage to low double-digit percentage range, said Donnacha Smyth, president excess casualty, Americas, at Axa XL.

On average, rates are still up but the magnitude of rate increases is slowing, said Douglas O’Brien, national practice division manager, casualty and alternative risk, in New York for USI Insurance Services LLC. In some cases in the second quarter, “we were able to negotiate more flat renewals for general liability, which two years ago was virtually impossible.”

“We are still seeing positive movement on rate, albeit slower than rate change in 2020 and 2021,” said William McElroy, New York-based portfolio director, casualty, for Aspen Insurance Holdings Ltd.

New capacity has helped stabilize rates, said Bill Wilkinson, national casualty president in Alpharetta, Georgia, for Risk Placement Services Inc., a unit of Arthur J. Gallagher & Co.

Umbrella capacity, which had contracted substantially, is beginning to reappear, Mr. O’Brien said. Clients would have been “lucky” to get lines of $5 million to $10 million just two years ago, but some insurers are beginning to deploy $15 million to $25 million again, depending on business line and other factors.

“Filling out a tower of greater than $100 million is still a challenge, but $50 million and lower is much easier today than a few years ago. Even up to $75 million is becoming easier to do,” Mr. O’Brien said.

Policyholders should expect “moderate” rate increases for the remainder of 2022, said David Gale, area senior vice president, casualty practice, at Gallagher.

“We are still seeing rate increases, but we would agree they are on a much smaller scale than they were over the last two years,” Mr. Gale said. New capacity in the middle and upper layers of liability towers has helped moderate increases, he said.

According to market experts, sources of new capacity include: Ark Syndicate Management Ltd. in London, which expanded to Bermuda last year, and Bermuda-based managing general agent Arcadian Risk Capital Ltd., which operates on a delegated authority basis on behalf of SiriusPoint Bermuda Insurance Co. Ltd. Neither company responded to requests for comment.

Multiple sources said liability coverage for commercial auto fleets remains a challenging placement subject to capacity restrictions and continued rate increases. “We remain concerned about the recent nuclear settlement activity,” Mr. McElroy said.

Policyholders have sought different ways to control insurance spending as rates have risen over the past several years. Mr. O’Brien said there is a willingness on the part of some insurers to offer more favorable terms when primary coverage is bundled with excess coverage, “to provide pricing relief when they write more of the package.”

Higher deductibles and retentions are common. “We are absolutely having those conversations with clients about the different ways to help manage the continuing rate increases,” Mr. Gale said. “Some clients make that decision and some do not.”

Increased inflation is also affecting insurance placements. “Inflation is something we’re thinking about a lot. What price do we charge today for the claim tomorrow?” Mr. Smyth said.