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Global Insurance Market Update

US Pricing Q2 2022

Insurance pricing in the second quarter of 2022 in the US increased 10%, compared to 12% in the prior quarter.
Panorama of Chicago

Financial and professional lines pricing declines, excluding cyber

Insurance pricing in the second quarter of 2022 in the US increased 10%, compared to 12% in the prior quarter.

Constant bar chart represents Global Insurance Composite Pricing Change.

Property insurance pricing rates increased 6% in the second quarter, continuing a decline in the pace of increases seen for the last several quarters.

  • Rate increases may accelerate in future quarters, driven by challenging conditions in the reinsurance market and reduced capacity.
  • Excess carriers looked to increase their attachment point, putting pressure on buffer layers.
  • Clients with significant losses or exposure to secondary CAT perils typically experienced above average increases.
  • Insurers continued to focus on secondary CAT perils — including wildfire, convective storm, and pluvial flood. The market deteriorated for insureds with heavy exposure to wildfire.
  • Insurers scrutinized contingent time element, especially for unnamed suppliers.
  • Exclusions for Russia, Ukraine, and Belarus on US-based clients with international exposure is now the norm.
  • Valuation has become a focal point for property insurers, driven by concerns about inflation, supply chains, and labor shortages, as well as loss experience in cases where adjusted loss amounts were well above reported values.

Casualty insurance pricing increased 6%; excluding workers’ compensation, the increase was 10%.

  • Casualty continues to be driven by workers’ compensation, which has helped lower average overall casualty rate increases.
  • Excess liability pricing increased 16%, compared to 10% in the first quarter, but was still lower than at the same time last year.
    • Clients showed limited interest in increasing limits.
    • Insurers continued to watch loss trends as the impact of courts being closed during earlier stages of the pandemic subsides.
    • Insurers have expressed concern regarding latency risks for “forever chemicals.”

Financial and professional lines pricing rose 21% in the quarter — a decline from the first quarter increase of 28%.  Excluding cyber, financial and professional lines pricing decreased in the low-single digits in the second quarter.

  • Pricing declined 6% for directors and officers (D&O) liability coverage for publicly traded companies, following a 3% increase in the first quarter.
    • There was strong competition from both legacy insurers and new market entrants.
    • A low level of transaction business — including in IPOs and special purpose acquisition companies (SPACs) — in the first quarter put some insurers behind their budget targets, resulting in competitive pricing for core accounts.
  • Fiduciary markets continued to be challenged by adverse judgements and ERISA 401k plan excessive fee litigation.
  • Cyber pricing increased 79%, compared to 110% in the prior quarter and 133% in December 2021.
    • Insurers have begun to calibrate underwriting and pricing strategies on an account-by-account basis rather than on a portfolio basis.
    • Several insurers recently entered the cyber market, increasing competition.
    • Insureds with strong cybersecurity controls may experience a stabilizing of pricing if they have previously experienced significant rate adjustments.
    • Insureds lacking basic cyber hygiene can expect to see continued significant premium and retention increases, coverage restrictions, and/or overall insurability challenges.