Cyber claims put pressure on financial and professional lines
Insurance pricing in the first quarter of 2022 in the US increased 12% — a slight reduction on the same rate of increase compared to the prior two quarters.
Constant bar chart represents Global Insurance Composite Pricing Change.
Property insurance pricing increases mirrored those of the fourth quarter of 2021 at 7%.
The first quarter of 2022 was the eighteenth consecutive quarter experiencing increased rates, though throughout 2021 the increases began to moderate.
Clients with significant losses, as well as those that showed poor risk quality, or had significant exposure to secondary catastrophe (CAT) perils — including wildfire, convective storm, and pluvial flood — generally experienced rate increases that were well above average.
Underwriters continued to scrutinize contingent time element coverage, especially for unnamed suppliers. Insurers continued to take a strict approach to terms and conditions including deductibles, non-physical damage cyber, communicable disease exclusions, and time element extensions. Insurers appear to be managing their line sizes for secondary CAT perils, and tightening their pricing; as such, the capacity has significantly reduced, negatively impacting client portfolios that are predominantly exposed to wildfire.
Clients with no losses, good risk quality, and in industries sought after by insurers continued to see surplus capacity, which again helped to mitigate pricing increases and deterioration of policy terms.
Valuation has become a focal point at virtually every renewal for all insurers, particularly related to concerns about the current inflationary environment, supply chain challenges, and labor shortages. Loss experience where adjusted loss amounts were well above the reported values has further heightened insurers’ focus on this issue.
Casualty insurance pricing increased 4%, in line with the fourth quarter of 2021. Excluding workers’ compensation, the increase was 6%.
The competitive workers’ compensation marketplace has helped to offset some of the increases in auto liability and general liability.
Insurers demonstrated a willingness to negotiate on auto liability and general liability rates in order to secure more profitable workers’ compensation lines.
The pace of increase in excess liability pricing was similar to the fourth quarter of 2021 at 10%.
Financial and professional lines pricing, driven by cyber, increased 28% — a fall from the fourth quarter of 2021 increase of 34%.
Directors and officers (D&O) liability insurance pricing for publicly-traded companies increased 3%, lower than the 6% increase observed in the prior quarter and continuing the decline from the 10% increase in the third quarter of 2021.
Additional capacity increased competition in the mid-to-high excess layers.
Insurers are also taking steps to move down large towers to lower levels of coverage by quoting primary layers and first or second excess layers.
Adverse judgements added strain to the already challenged fiduciary coverage. Insurers continue to increase minimum retentions and implement tighter risk management requirements.
Cyber pricing increased 110%, in large part due to the re-pricing and re-underwriting of cyber risks.
Heightened frequency and severity of claims activity contributed significantly to pricing increases.
Over 60% of clients took higher retentions to help offset premium impact.
Cyber underwriting continued to focus on a company’s control environment and cybersecurity maturity.
The war in Ukraine exacerbated concerns surrounding systemic exposures and accumulation risk.