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Risk in Context

2016 Insurance Markets: Casualty Outlook Remains Positive

Posted by Stephen Kempsey February 19, 2016

Conditions in the US casualty insurance marketplace have been generally improving over the last several years, and the outlook for buyers remains generally positive for 2016, barring unforeseen changes.

It is worth noting, however, that several leading insurers are reexamining the profitability of their casualty portfolios, which could lead some to reduce capacity and seek higher rates and/or attachment points for companies in certain industries.

In the fourth quarter of 2015:

  • Rates for general liability were typically down 10% to up 5%, with more than half of all companies renewing with rate decreases.
  • Lead umbrella rates were typically down 5% to up 5%, while excess layers were down 10% to up 5%.
  • Despite rising medical costs, workers’ compensation rates were down 10% to flat for guaranteed cost programs and down 10% to up 5% to loss sensitive programs. And nearly three in five companies renewed with rate decreases — a marked shift from the previous year.

The exception among casualty lines has been auto liability, where, in the fourth quarter, nearly half of all companies renewed with rate increases. And if losses continue to accumulate, this market is likely to remain challenging for most buyers in 2016.

Emerging Risks

Even as conditions remain generally favorable, casualty buyers could face coverage issues in 2016, including:

  • Cyber liability: The debate continues over whether general liability and excess casualty policies should provide coverage for bodily injury and property damage related to cyber events.
  • Infectious disease: Policyholders should consider whether some types of disease are excluded under general liability policies’ pollution exclusions. The recent focus on the Zika virus in South and Central America underscore this risk.
  • Drones: The use of unmanned aerial systems — drones — took off in 2015 and is poised for new heights in 2016. That will bring more scrutiny from underwriters regarding the potential for personal and advertising injury, bodily injury, and property damage.
  • Marijuana: The legalization of marijuana in several states (for both medicinal and recreational purposes) presents new questions for employers. These include whether workplace injuries suffered by employees while under the influence of marijuana can be compensable, and whether marijuana can be used for treatment in a workers’ compensation claim.

These and other market trends bear watching in 2016 and beyond. For more information, read Marsh’s United States Insurance Market Report 2016 or listen to a replay of The New Reality of Risk® webcast on insurance market trends.

Related to:  Casualty

Stephen Kempsey

Steve Kempsey is Marsh’s US Casualty Practice Leader. He has full management and oversight responsibilities for Marsh’s various casualty businesses in the United States; including primary, excess, international, workers’ compensation, and various specialty industry offerings.