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Risk Placement Services’ U.S. Casualty Market Outlook Examines Firming Umbrella and Excess Market, With a Focus on Key Niche Industries

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The U.S. casualty insurance market has caused broad firming across the umbrella/excess liability line, a trend expected to continue during the remainder of this year and into 2021, according to E&S wholesale broker and MGA Risk Placement Services, Inc.

During the first half of 2020, the umbrella/excess casualty market has been characterized by firming insurance rates in the double digits or higher, diminished capacity, higher attachment points and conservative underwriting practices, as massive loss trends from prior years continue to impact the line. 

“Carriers began reducing capacity in the excess market in 2019 from lead limits of $20 million-$25 million to a lead of $10 million, and this year to a lead of $5 million,” said Adam Mazan, RPS Area President, Southern California.

In addition, some carriers are no longer willing to quote the lead excess layer, with actuaries taking a close look at the origin of losses and rate deterioration.

What’s Driving the Market

Whereas in 2018 there may have been 25 markets vying for the lead layer on an account, today there may be only five or 10, depending on the class of business.

The firming Casualty market has been driven by catastrophic liability losses stemming from automobile accidents, active shooter events, liquor liability-related accidents, construction defect claims, personal injury lawsuits, opioid casualties, sexual assault and molestation claims and wildfire litigation – all fueled by an aggressive plaintiffs’ bar, litigation funding, anti-corporate jury sentiment and nuclear verdicts.

The commercial auto liability market has predominately been responsible for impacting carrier profitability and driving up excess rates.

“Any risk with an auto exposure is facing higher auto liability rates and subsequently higher excess rates,” explained Zach Burdine, RPS Area President, Texas.

The RPS U.S. Casualty Market Outlook also revealed several additional key factors impacting market conditions.

  • While rate increases are being experienced across the board, industries hit particularly hard by the firming excess market include habitational, energy, construction, sports and entertainment, restaurants and bars and the religious sector, among others.
  • The habitational industry has been experiencing a significant rise in claims activity in the $1 million-$5 million bandwidth, bleeding into the excess market. Admitted carriers have dramatically reduced their capacity or exited the habitational sector completely, opening the door to more E&S business.
  • Residential contractors, utility contractors, street-road contractors and those with auto exposures are experiencing firming rate trends with the umbrella/excess market as a result of poor loss history and social inflation.
  • Construction defect claims are on the rise, driving carriers to put coverage restrictions on certain exposures.
  • Construction-related environmental claims continue with great frequency, putting pressure on rates.
  • Capacity is tight, rates are high and deductibles and retention levels are even higher for the New York construction market. Underwriters are looking for best-in-class accounts.
  • The energy sector is experiencing a minimum 25% hike year-on-year in the excess market, with added creativity required to build a tower.
  • The sports/entertainment, and bar/restaurant, industries, already experiencing significant rate increases and diminished capacity, have been hard hit by the pandemic and face economic uncertainty.
  • The religious sector experienced market firming in late 2019 and into 2020. In the wake of COVID-19, carriers are including new communicable disease policy exclusions.
  • COVID-19 continues to put additional pressure on the need for rate adequacy across industries.

“The Casualty market was in a state of change throughout 2019, and it continues now through 2020,” noted Bill Wilkinson, RPS President, National Casualty Brokerage. “It’s important for agents and brokers, especially those newer to the business, to reach out to their carrier partners and experts early, so they can understand the market impacts well before the renewal and make the process as smooth as possible for their clients.”

Download a copy of the RPS U.S. Casualty Market Outlook.

 

About Risk Placement Services

Risk Placement Services (RPS) is one of the nation’s largest specialty insurance products distributors, offering valuable solutions in wholesale brokerage, binding authority, programs, and standard lines, plus specialized auto through its Pronto Insurance brand. Headquartered in Rolling Meadows, Illinois, RPS has more than 80 offices nationwide. For more information, visit RPSins.com.

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