E&S market sees improving conditions for buyers

CHICAGO – Excess and surplus lines insurance rates are flattening or declining for several classes of risk, but rates are still climbing for policyholders with risks in regions with challenging liability environments or that have poor loss experience, a panel of experts said.

After years of sometimes sharp rate increases, capacity has grown in several market sectors, driving increased competition, they said during a session last week at the Chicagoland Risk Forum, the annual conference of the Chicago chapter of the Risk & Insurance Management Society Inc.

Excess liability

Rates for excess liability layers are plateauing in most classes and regions after four years of increases, said Tim Pedersen, a Chicago-based senior vice president and principal at wholesaler Brown & Riding Insurance Services Inc.

Exceptions include certain cities or regions, such as Miami, New York and parts of Illinois, where rates are still increasing, and certain lines, such as accounts with significant auto exposures, he said.

“We’re still seeing some carriers cut capacity on heavy auto fleets. Carriers that were doing $10 million excess of $5 million or $15 million excess of $10 million, you are starting to see them cut their line,” Mr. Pedersen said.

For Oct. 1 renewals, some insurers are cutting capacity lower down a coverage tower but offering more capacity higher up, he said.

“Overall, we’re seeing the excess towers on solid, clean risks, where there’s competition, stay flat. If you’ve got a lot of losses, or you’ve got some concern in the marketplace, then we’re seeing 5% to 20% increases, and if there’s heavy auto exposure, you might see a little bit more than that,” Mr. Pedersen said.

Property

The surplus lines property market has been a “roller coaster” for the past few years, said Christa Nadler, Chicago-based executive vice president at Risk Placement Services Inc., the wholesale unit of Arthur J. Gallagher & Co.

Habitational risks, in particular, have been difficult for buildings constructed before 1980, following the Surfside, Florida, condominium collapse in 2021, she said. The partial collapse of the 1981 building, which killed 98 people, resulted in a $1 billion liability settlement.

“That’s been a really tough spot, whether it be condos or apartments,” Ms. Nadler said.

In other areas, though, property rates are softening, she said.

“For a lot of our cat-exposed deals – Florida, Louisiana, Texas – we are starting to see some bigger rate reductions. I’ve seen 10% to 15% on some deals, depending on the situation,” she said.

In tougher classes, such as recyclers and manufacturing companies, policyholders are seeing flat renewals or small increases in the admitted market, but if they have to access the nonadmitted market, “it’s really a free-for-all,” Ms. Nadler said.

“A lot of these accounts have been passed from underwriter to underwriter to underwriter in the standard market, and maybe there weren’t a lot of eyes being put on inspection reports or requirements for recommendation compliance, and it’s starting to catch up with people,” she said.

Cyber liability

The cyber liability market continues to see decreases following a doubling or tripling of rates between 2020 and 2022, said Kevin Zinter, Chicago-based executive vice president at wholesaler Amwins Inc.

Improved security measures put in place by policyholders are helping drive the decreases, he said.

“There are certainly still pockets that are very tough to insure, like airlines, large manufacturers, hospitals, but for many other risks, we’re now seeing 20% decreases, 40% decreases,” Mr. Zinter said.

In addition, for risks with improved security measures, previously sublimited exposures – such as ransomware or dependent system failure – are being included in the full policy limits, he said.

In addition, there has been an influx of new insurers in the cyber liability market on both primary and excess layers, Mr. Zinter said.

Financial lines

New capacity has also entered the financial lines and management liability sector, said Joe Kelly, Chicago-based senior vice president, commercial management liability, at Sompo International Holdings Ltd.

After a hard market between 2019 and 2021, the market entered a “correction” phase in 2022, and rates continue to fall, though the pace of decreases has slowed, he said.

The slowdown in rate decreases will likely continue in 2025 as court awards and settlements, defense costs, and the number of claims continue to rise, Mr. Kelly said.

“Your loss costs will overtake your earned premium growth, and then you start working yourself back toward a hard market again,” he said.