Property rates easing; insurers press for liability increases

SAN DIEGO – After more than a year of sharp property insurance rate hikes and six years of sustained price increases, commercial insurance buyers are starting to see relief on insurance costs, underwriters and brokers say.

While pricing varies depending on geography, account size and loss history, insurers — many of which are posting increased quarterly and annual profits — are making property capacity available, they say.

General and excess liability prices, though, are headed upward. Insurers cite higher losses in the auto liability business and say they see a general increase in court awards and settlements.

The bifurcated market for major lines of coverage will likely continue, underwriters and brokers said during interviews at Riskworld, the Risk & Insurance Management Society Inc.’s annual conference held last week. The meeting, one of the largest events on the insurance and risk management calendar, brought together about 10,000 risk professionals.

Property

Property insurance rate increases for large catastrophe-exposed accounts are generally easing, and some buyers are seeing decreases, said Derek Talbott, Boston-based division president, North America property and specialty lines, at Chubb Ltd.

After years of increases, underwriters view rates for that business as “adequate,” and more capacity has entered the market, he said.

With the lack of major catastrophe losses, property rates are decreasing for accounts without losses, said Michael Chang, New York-based head of corporate risk and broking, North America, at Willis Towers Watson PLC.

“In the property market, we are seeing reductions on that side of the house because they overcorrected the business,” he said. “You are seeing a flat-to-reducing market.”

The property market is seeing more capacity, and rates are reducing, said Mark Moitoso, Atlanta-based executive vice president, risk practices leader, at Lockton Cos. LLC.

“We’re seeing rate decreases on clients even with cat exposure, which we were not seeing three to four months ago,” he said.

However, some policyholders are still seeing increases, so average rate changes are about flat, Mr. Moitoso said.

Even though rates are declining for some property accounts, premium levels are often increasing because of the effect of inflation on exposure values, said Greg Zimmer, CEO of Irvine, California-based Alliant Insurance Services Inc.

“Even if there’s a modest decline in rate, the premium level is more than likely still modestly increasing,” he said.

Capacity has increased, with some new insurers entering the market and existing insurers expanding their property capacity, Mr. Zimmer said.

“With some of these huge property placements, a year ago it wasn’t necessarily a question of what the price was, it was a question of whether you were even going to be able to get that done or not, and that has, at least to a degree, abated,” Mr. Zimmer said.

The property market is more competitive, said Martin Neuhaus, president of Munich Reinsurance Co.’s facultative and corporate business in North America.

“We still see rate increases, on average, so it’s not really softer, but it has become more competitive,” he said.

Capacity is returning to the property market, said Eric Joost, New York-based chief operating officer at CAC Specialty.

“There’s less acceleration or maybe some downward rate movement, but there are arrows pointing in different directions,” he said.

For smaller programs outside of traditional catastrophe regions, which are often covered by a single insurer rather than syndicated among a group of insurers, rates continue to rise as increases in severe convective storms and other weather-related losses hit the sector, Mr. Talbott of Chubb said.

“That’s created a situation where pricing on that single carrier business has actually needed to catch up with that increased loss-cost environment,” he said.

Liability

Increased liability losses and higher court awards and settlements are driving up rates for general and excess liability, said Jon Tellekamp, head of excess casualty, major accounts, at Liberty Mutual Insurance Co. in Boston.

Excess casualty rates are increasing by “mid-teens” on average, and some “distressed” accounts are seeing more than 20% increases, he said.

Although some states, including Florida, have recently passed various tort reform measures, they have not yet influenced liability losses, Mr. Tellekamp said.

Many of the excess liability losses stem from auto liability risks, he said.

Policyholders are increasing their self-insured retentions and using captives more, in some cases on higher layers of coverage, Mr. Tellekamp said.

Excess and auto liability lines are still seeing some double-digit increases, said Mr. Joost of CAC.

There is still plenty of capacity in the casualty market, but prices are rising, said Mr. Moitoso of Lockton.

“It’s not like companies are lowering their $10 million limits; they’re still going to offer $10 million but maybe at a 5% to 10% rate increase,” he said.

Insurers are pushing for increased rates in general and excess liability, citing increased losses. Still, clients without significant losses, which have seen rate increases since 2017, are resisting, said Mr. Chang of WTW.

“Those accounts that don’t have losses and where you can’t really substantiate that there’s a class issue in that industry, or there’s a problem with that account, then they’re looking for more flexibility on their business,” he said.

Rising liability losses will likely lead to more insurers increasing loss reserves, said Mr. Neuhaus of Munich Re.

“A number of carriers increased their reserves at the end of 2023, and we expect more to come in that area,” he said.