US Pricing Q4 2022

Financial and professional lines decrease; property and casualty rise

Insurance pricing in the fourth quarter of 2022 in the US increased by 3%, compared to 5% in the prior quarter.

Property insurance pricing increased by 11% in the fourth quarter, up from 8% in the third quarter and the twenty-first consecutive quarter in which pricing rose.

• Total insured values increased by 10%, on average, in the fourth quarter.
• The pricing increases experienced by clients were largely driven by challenges in the reinsurance market leading up to the January 1 treaty renewals.
• The bifurcation in renewal results continued.
  • Best-in-class risks — with limited named windstorm exposure and stable capacity from the incumbent insurer — typically experienced better results.
  • Generally, clients that experienced higher increases were affected by losses and/or were predominantly located in high hazard CAT zones, such as the Gulf of Mexico and the Atlantic coast.
• In light of global inflation trends, underwriters continued to focus on valuation.
• Insurers maintained discipline regarding terms and conditions including deductibles, non-physical damage, cyber, communicable disease exclusions, and time element extensions.

Casualty insurance pricing increased 1%, compared to 3% in the prior quarter; excluding workers’ compensation, the increase was 3%.

• Insurers are carefully monitoring the impact of inflation, court systems reopening, the increased number of vehicles on the roads post-pandemic, and the recent hurricanes.
• Casualty pricing continued to be driven by workers’ compensation, which has helped moderate the average rate increases.
• Incumbent insurers proactively offered improved terms as a way to keep existing clients from marketing their program.
• Excess liability pricing rose 6%, compared to 7% in the prior quarter.
  • Insurers continued to monitor the severity of claims given what they perceive as recent large losses with questionable underlying liability.

Financial and professional lines pricing decreased 10% in the fourth quarter, compared to a decline of 6% in the third quarter.

• Directors and officers (D&O) liability insurance pricing for publicly traded companies declined by 14% in the fourth quarter, compared to a decline of 9% in the third quarter.
  • Post-transaction renewals, such as those coming one or two years out from an IPO, led the pricing decreases.
  • Competition was strong from both new insurers and legacy markets as they sought a strong finish to 2022.
  • Retentions decreased for approximately 10% of clients.
• Fiduciary markets continued to be challenged by adverse judgments, although pricing was generally flat compared to a 2% increase in the third quarter.
  • Defense costs, settlements, and plaintiffs’ counsel fee awards continued to drive insurer losses on Employee Retirement Income Security Act of 1974 (ERISA) 401k plan excessive fee litigation.
  • An uptick in other ERISA allegations has insurers expressing concern that the fiduciary line is becoming unpredictable.
  • Some insurers continued to increase minimum retentions for larger plans.
  • Controls/401k plan risk management is key to obtaining coverage.

Cyber insurance pricing increases moderated to 28% in the fourth quarter, compared to 48% in the third quarter as new entrants to the market increased capacity. 

• In some cases, increased competition and favorable cybersecurity controls resulted in flat renewals or reductions.
• Claim frequency declined, while severity remained high.
• Privacy claims increased, including those related to online tracking and other consumer protection issues.
• Systemic exposures, including those related to war, continued to be a concern.