Rates will continue to rise in the Casualty market through the remainder of 2021 and into 2022, but insureds should expect a less-challenging market than last year, according to the mid-year U.S. Casualty Market Outlook released by Risk Placement Services (RPS), the E&S wholesale broker and managing general agency.
"The Casualty market landscape has improved since 2020, but rates continue to firm, primarily driven by the unpredictability of the Excess market," said Bill Wilkinson, President, National Casualty Brokerage, RPS.
Rate increases in the Umbrella/Excess market are currently averaging 15%-25%, which is an improvement from hikes of 30% or more for high-hazard segments in 2020. But when building Excess towers, more upward pricing pressure is being seen in a tower than there is in the lead layer. Additionally, more carriers are needed to reach the tower's overall limit.
A welcome change from last year is new competition coming into the Excess market. These new entrants are tempering rate increases.
But another factor continues to impact rates: nuclear verdicts. These multi-million dollar jury awards are driven by strong anti-corporate sentiment and private equity funding of third-party litigation. Whether or not negligence exists seems to be ambiguous in today's litigation environment, Wilkinson said.
The Outlook Found E&S Casualty to be a Tale of Two Markets at Midyear
"For low-hazard, well-performing accounts, competitively priced renewals are available with anywhere from 5%-10% year-over-year increases," said Adam Mazan, Area President, RPS.
"The biggest challenge in the E&S marketplace is with mid- to high-hazard accounts, where carriers continue to push rates and are assessing whether they want to write risks with specific exposures at any price, or focus on low-hazard accounts where they can build their book."
Wilkinson added: "Knowledge of loss-leading exposures and fear of the unknown will continue to drive underwriting decisions in the Casualty market and limit available capacity, especially in certain sectors like Habitational, and those insureds with heavy auto exposures."
Other findings from the U.S. Casualty Market Outlook: Mid-Year 2021
- Habitational is the firmest market right now, beset by rate increases and diminished capacity due to the rise in Assault & Battery (A&B) and habitability claims, as well as, increased costs from typical slip and fall claims. Some carriers are choosing to no longer write General Liability (GL) and Excess coverage because of the influx of losses.
- In Construction, many carriers are requiring higher GL limits and an Auto attachment of $2M, $5M or more. As a result, the use of an auto buffer placement is becoming more commonplace.
- New York Construction remains firm with losses driving rate pressure. Capacity continues to be restricted for GL and even more so on Excess layers, as only a limited pool of carriers are willing to write in New York due to its Labor Laws, which place absolute liability on the employer as well as the owner and general contractor.
- Contractors Pollution Liability capacity continues to decrease and term limits tighten, but coverages are still relatively inexpensive. Energy-construction risks, however, are more difficult to place.
- Energy Casualty losses continue to be steady, particularly for auto exposures, with rate increases averaging 10%-15%. General Liability is experiencing the least amount of rate pressure, with increases averaging under 5%.
- For Sports/Entertainment and Bars/Restaurants, Excess rate increases are lower than they were in 2019 and 2020, but they will continue their upward trend, with an average 5%-7% increase for well-performing businesses and entities.
- Religious sector carriers that still offer Sexual Abuse & Molestation coverage have moved from occurrence to claims-made coverage, and require higher minimum premiums ranging from at least $100,000 to upward of $200,000.