Casualty: A Customized Renewal Strategy Is Crucial
Most lines of casualty insurance continue to face the usual challenges of selective underwriting, rate increases, capacity reductions and restrictive coverage terms and conditions. USI’s 2021 Commercial P&C Market Outlook, Mid-Year Update shows that umbrella/excess insurance is still the most challenging casualty market.
Average rate increases of 15% to 25% are the norm, with some insureds in more hazardous industries or with prior loss experience continuing to see high-double-digit or even triple-digit rate increases year over year. Almost every account requires explicit non-negotiable communicable disease exclusions. It’s especially critical to approach the placement of the umbrella/excess tower strategically in the challenging market to minimize pricing surprises while ensuring broad coverage and sufficient limits.
Commercial Automobile Liability Coverage
Crucial for businesses that own vehicles or send employees out on errands in their personal vehicles, this coverage protects the company against liability and loss following an accident, theft or other incident. While this line of insurance has been unprofitable for insurance companies for many years, it showed improvements in loss ratios in 2020. Nevertheless, the coverage remains under rating pressure and restrictive underwriting. For example, some insurance carriers require data that goes back seven or more years, and many insureds are evaluating alternative program structures, including self-insured retention (SIR), high deductibles and captive programs.
Workers’ Compensation Insurance
Compared to the lines previously mentioned, workers’ compensation appears to be performing well for most insureds in most U.S. states. Rate decreases may be moderating in various states, and rate increases are not as high as expected in others, including in those states with COVID-19 presumptive liability. However, COVID-19’s long-term impact on workers’ compensation remains to be seen, and states are increasingly adopting presumptive liability legislation. During the first quarter of 2021, pandemic-related claim activity and frequency were lower than expected, due to more employees working from home, changes in job duties, and furloughs. Together, these factors created a positive workers’ compensation environment.
How USI Can Help Mitigate Casualty Risks and Insurance Costs
In a market characterized by almost universal rate increases, companies should proactively work with their brokers to identify solutions that may offset rate increases, reductions in capacity and restrictive coverage terms and conditions. Preparing early and having a well-thought-out plan of action including alternatives is key in today’s market.
See USI’s full 2021 Commercial P&C Market Outlook, Mid-Year Update for detailed steps to help companies: prepare early for renewal, develop a quality underwriting submission, dialogue with insurance markets to develop valuable relationships, and analyze the cost-benefit of program structural changes.
Executive & Professional Risk: Financial and Operational Acumen, Strong Governance and Cyber Resiliency Are All Critical
Directors & Officers Insurance
Second quarter premiums are up 10% to 50% for public company directors and officers (D&O) insurance, driven by continued economic uncertainty in the wake of the COVID-19 crisis, including potential bankruptcies in industries that are slow to recover. While this range of premium increase is an improvement from the latter part of 2020 (up 20% to 100%), the following challenges are complicating the D&O marketplace:
- Increasing defense costs and settlement amounts for unresolved securities claims
- The threat of future securities litigation arising from special purpose acquisition company (SPAC) IPOs and the “de-SPAC” process
- Shareholder’s increasing focus on environmental, social and governance (ESG) issues, especially in the areas of diversity, equity and inclusion
For private companies, premiums and retentions also continue to increase. Ideally, this relative stability should help D&O buyers that effectively differentiate their financial, operational and governance risk profile in a positive manner obtain better-than-average results.
Cyber Insurance — Including Packaged Policies With Cyber/Privacy Components
With the continued increase of ransomware events and network intrusions, the cyber insurance market continues to harden, making it more difficult and expensive for organizations to purchase coverage and offset risk. Insureds with less-than-ideal cyber controls will experience higher premiums, reduced capacity, and higher retentions — assuming insurance carriers are willing to even take on the risk. This challenge is especially difficult for industries that have historically not invested in information security. These industries are hardest hit because they are not compared against industries that readily acknowledge the need to continuously invest in information security.
Insurers and reinsurers alike are deeply concerned with the potential for aggregate loss stemming from business process providers. In just the past six months, we have witnessed ransomware events and network intrusions that stem from an attack against a single vendor that inadvertently exposed countless entities, governments and organizations.
Other Lines of Executive and Professional Insurance
Premium increases continue across the board for other lines of executive and professional insurance, ranging from 5% to 75%. For fiduciary liability coverage, plans with significant retirement plan assets are taking substantially larger retentions and facing larger increases in premium. Employment practice liability (EPL), crime, kidnap and ransom (K&R), and professional liability all continue to see upward pressure on premiums and retentions. Overall, the executive and professional insurance market should continue to be firm heading into the second half of 2021, as overall risk uncertainty continues to weigh on underwriters.
How USI Can Help Companies Mitigate Emerging Risks
USI’s Executive and Professional Risk Solutions (EPS) practice proactively reviews EPL and D&O insurance policies (including any risk mitigation features), identifies coverage gaps (intended or unintended) and keeps abreast of potential coverage enhancements in the marketplace to address evolving exposures.
For employers with workforces returning to the worksite, your USI account team can review your organization’s current insurance program and provide benchmarking of limits and retentions (peer comparisons) and evaluate coverage for COVID-19-related claims. USI can discuss improvements to insurance policy language to expand the scope of coverage before each year’s renewal.
To help clients mitigate the effects of the hardened cyber market, we can:
- Engage strategic resources, many exclusive to USI, aimed at evaluating and improving their cyber hygiene and profile
- Lead a deliberate placement process, which will shape the conversation around their risk profile
- Leverage customized terms experience and our expertise identifying viable cyber insurers
- Provide analytical input around questions of limits, claims impact, and cyber underwriting concerns
EPS’s main objective is to ensure that companies and their leaders understand how to mitigate emerging risks, are comfortable with the risks that are retained, and have clarity on the risks that are transferred.