General liability and excess umbrella commercial insurance rates increased again during mid-year renewals, but policyholders generally saw smaller price hikes than a year ago, insurance industry sources said.
Capacity is available and can be costly but new capital entering the market can help blunt rate increases.
“We had a lot less of an increase than we anticipated. We were still in double digits from a general liability and umbrella and excess standpoint, but we were anticipating 40% to 50% and ended up with about 10% to 15%,” said Penni Chambers, vice president of risk management for Hillwood Development Co. LLC in Dallas.
On average, policyholders did not see increases as high as those in 2020 or 2019, said Douglas O’Brien, national practice division manager for casualty and alternative risk in New York for USI Insurance Services LLC. “I do see a thawing,” he said.
While some policyholders are still seeing “significant” increases, they constitute the minority, whereas last year the reverse was true, said Jessica Cullen, managing director, casualty practice, in New York for Arthur J. Gallagher & Co.
Most renewals have seen low- to mid-double-digit increases, but a “handful” over the past six weeks have been in the high single digits, said Adam Mazan, Santa Ana, California-based regional vice president for Risk Placement Services Inc.
Admitted market risks started flowing to the surplus market in the fourth quarter of 2019, but the stream has slowed in the past few weeks as standard markets have become more competitive, sometimes undercutting rates, or occasionally extending larger lines, he said.
“We are seeing less rate than what was achieved in 2020, but rate level increases remain significant — double-digit between 20% and 40% — depending on industry class and attachment point,” said Donnacha Smyth, Bermuda-based head of excess casualty for Axa XL in North America, a unit of Axa SA.
Most policyholders went through “one tough renewal” in either 2019 or 2020 and then saw less drastic changes in 2021, with a few “stragglers” seeing the onerous changes this year, Ms. Cullen said.
“Tough” renewals generally included changes in structure, deductibles, terms and conditions, and rates, or at least three out of the four. At subsequent renewals, policyholders likely saw changes in one or perhaps two of those categories, Ms. Cullen said.
Gallagher’s 2021 Spring/Summer Market Report shows 63% of its U.S. clients saw a rate increase.
Excess and umbrella markets are “still deploying their capacity selectively,” said Mr. O’Brien of USI. Insurers are largely offering limits in blocks of $5 million and $10 million, compared with $25 million lines offered prior to the market hardening. Attachment points can be $2 million but run to as high as $5 million, depending on the nature of the risk, including auto count/exposure.
USI’s commercial property/casualty midyear update showed increases for umbrella and excess risks varying by size, with middle-market accounts up 5% to 25% and larger “risk management” accounts increasing 25% to 50%. For both, the increases depended on the class of business covered and limits purchased.
While she did not face challenges assembling the capacity for Hillwood’s program, Ms. Chambers said she engaged more insurers than historically because line sizes have been curtailed. Using more insurers means completing more submissions, which creates more work for risk managers, she said. “Risk managers, brokers, and underwriters are all extremely busy.”
There is ample capacity in the marketplace, Mr. Mazan said. “That capacity just wants significantly higher rates with much more restrictive terms than what had historically been in the marketplace,” he said.
Hillwood operates a charter air business with four 737-300 aircraft used by groups, including regional businesses and athletic teams. Ms. Chambers said “hefty” rate increases continue in aviation markets, but Hillwood was able to differentiate itself by investing in ion dispersant technology – which kills viruses including COVID-19 – for its planes and ended up with “a good renewal.”
USI saw increases for most but not all clients, as new market capacity helped to moderate the price hikes. “Some of our more recent renewals have actually taken advantage of some of that capacity in the higher layers,” Mr. O’Brien said.
New capacity has helped plug holes in programs and moderate some rate increases, Mr. Mazan said. “I’ve used new capacity a handful of times to keep rate increases suppressed.”
“There are a number of new entrants in the market providing an influx of capacity, which gives clients and brokers some additional opportunities to complete gaps in towers or purchase additional limits,” said Mr. Smyth of Axa XL.
Meanwhile, most insurers are requiring explicit communicable disease exclusions, especially for high-exposure industries like hospitality, Mr. O’Brien said.
Insurers are developing their own preferred wording for COVID-19 exclusions, Mr. Smyth said. “Cyber is another area where there has been significant change as the market moves from silent to affirmative or explicit,” he added.