Commercial property challenges may spread to other lines: Lockton

Although commercial insurers generally reported healthy combined ratios as well as increases in net written premiums over 2021, commercial insurance markets face continuing challenges with inflation, labor shortages and supply chain constraints.

These challenges continue driving up replacement and repair costs, extending time needed for recovery and contributing to an intense focus on valuations, according to a report Tuesday from broker Lockton Cos. LLC.  

Through the first six months of the year, a group of insurers reported largely rising net written premiums and combined ratios mainly under 100%.

Hurricane Ian changed all that. “The P&C insurance market was previously on a path toward stabilization, but Ian represented a major event for both insurers and reinsurers,” Lockton said.

The 2022 Atlantic hurricane season was the third-most expensive season on record, according to Munich Re, with $65 billion of insured losses and $110 billion in total losses, according to initial estimates.

Accumulation property catastrophe losses and automobile losses concern the insurance industry, contributing to a $24.3 billion underwriting loss for the property/casualty industry for the first nine months of 2022, according to A.M. Best & Co. Insurers with the greatest exposure to personal lines and property saw the most significant impacts.

Questions remain on how this late event and changing calculus will affect how reinsurance and insurance capacity will be deployed in 2023, and at what terms.

While conditions across many major lines, including directors and officers liability, cyber and umbrella/excess liability, are better and more competitive than they have been in recent years, property markets may roil overall negotiations.

Workers compensation also remains favorable to buyers and countercyclical to the broader market, Lockton said.