Casualty rates continue to climb as concerns about court awards remain

Commercial insurance buyers saw primary general liability rates rise in the low- to mid-single-digit range during 2024 year-end renewals, and umbrella and excess rates rose more sharply as underwriters raised concerns over increasing liability awards.

Excess insurers pushed through double-digit rate hikes on many accounts, with buyers in sectors such as habitational property and those with significant auto liability exposures seeing some of the biggest increases, experts say.

Policyholders were able to soften the impact by combining profitable workers compensation placements with other liability lines and retaining more risk at various layers in their coverage towers. Still, experts say rates will continue rising in the first half of this year.

“Things continue to be somewhat challenged in terms of capacity, terms, conditions and pricing, but, that said, the average primary GL rate increase was actually down quarter to quarter over the course of 2024 both in the middle market as well as risk management,” said Tom Ryan, Chicago-based casualty practice leader for the Midwest and Great Lakes at Arthur J. Gallagher & Co.

Pricing

Rates increased about 5% for primary general liability, 10% to 12% for middle-market excess and umbrella renewals, and 10% to 15% for larger or risk management accounts, he said.

“A lot of carriers continue to stress concern over reserve adequacy and loss trends for GL,” said James Sallada, New York-based casualty broking leader, North America, at Willis Towers Watson PLC.

Policyholders that combine their often profitable workers compensation business with their other liability placements can mitigate some of the increases insurers are imposing, he said.

Rates for less hazardous general liability exposures are increasing in the lower single digits, and higher hazard lines are seeing mid- to upper-single-digit increases, Mr. Sallada said.

Excess liability rate increases range from high-single-digit to lower-double-digit,  he said.

Excess and umbrella liability rates continue to increase, said David Mendes, New York-based head of excess casualty at The Hartford Financial Services Group Inc.

“In the umbrella space, we’re definitely seeing larger rate increases, particularly when there’s a larger auto exposure or troubled loss history,” he said. “In the excess space, we’re seeing a lesser increase than the umbrella space, but both continue to rise with claims trends.”

Increased court awards and settlements, higher commercial auto claims and the rise in third-party litigation funding are some of the main factors behind the trends, Mr. Mendes said.

Penni Chambers, Dallas-based vice president, risk management, at Hillwood, a Perot company, and secretary of the Risk & Insurance Management Society Inc., said, based on recent meetings with casualty underwriters, she expects insurers to push for double-digit increases when Hillwood renews in May.

While Hillwood has not suffered a significant loss, other policyholders in the same region have seen “nuclear verdicts,” which have led to higher rates from many commercial insurers, she said.

“Dallas County once was very business-friendly, but now I’m starting to see a little bit of a shake in that,” Ms. Chambers said.

Among efforts to better manage risks, policyholders are using strategies such as selecting lawyers they believe better understand their circumstances and paying the difference in fees between their counsel and the lawyers offered by insurers, she said.

Risk managers are willing to collaborate with insurers on issues such as advocating for tort reform, but insurers need to help drive the efforts, Ms. Chambers said.

“Florida just recently had some tort reform; we will see how that plays out, but if that works for Florida, it may work for other states,” Ms. Chambers said.

Attachment points

In addition to rates rising, attachment points have increased.

Attachment points for accounts with difficult products liability and premises liability risks have risen from $2 million per occurrence and $4 million aggregate to $4 million/$4 million or $4 million/$8 million, Mr. Ryan said.

Over the past 18 months, policyholders have been more willing to add self-insured retention “corridors” between primary and excess layers to lower premiums on challenging fleet placements, he said.

Attachment points for programs with significant auto liability risks have risen significantly in recent years, Mr. Mendes said.

“It’s not uncommon to see $5 million or  $10 million attachment points for a lead umbrella carrier to mandate,” he said.

Policyholders are keeping more risk through larger retentions, quota share programs and corridor deductibles, Mr. Mendes said.

U.S. casualty reinsurance renewals for treaties without significant losses ranged from -5% to 5%, which eased pressure on liability insurers, Mr. Ryan said.

“My suspicion is that that’ll help to temper rate increases on the direct retail primary and excess side throughout 2025,” he said.

Capacity for primary layers remains adequate, but excess insurers continue to cut capacity available on lower excess layers, regardless of the risk class, Mr. Sallada said.

“You have to put in more markets to achieve the same limit adequacy that you had in the prior year, and that’s just an inefficient buying structure,” he said.