P&C market most rapid changing in a generation in Q2: Burns & Wilcox

The US P&C insurance market in Q2 will be looked back upon as having been “the most rapid changing in a generation” amid Covid-19, with some segments like excess liability harder than they have been since the mid-80s, according to wholesale broker Burns & Wilcox.

In an update on the sector, the firm noted that an already firming marketplace had developed through 2019 that continued its trajectory into 2020, prior to the “unparalleled events” developing around Covid-19.

“Although rates were increasing and carriers were becoming much more selective in underwriting and risk selection, it was primarily limited to certain lines of business, industries and account sizes.

“That changed overnight in early March setting the stage for an intense and rapidly developing marketplace with no limitations on account size, location or line of business notwithstanding workers compensation,” said the report.

The HW Kaufman Group subsidiary said that while most markets continue to have plentiful capacity with strong balance sheets, their deployment of capacity on single risks is being “strategically” underwritten within certain lines of business such as umbrella and excess liability, auto liability, D&O and property cat.

”Although rates were increasing and carriers were becoming much more selective in underwriting and risk selection, it was primarily limited to certain lines of business, industries and account sizes. That changed overnight in early March setting the stage for an intense and rapidly developing marketplace with no limitations on account size, location or line of business notwithstanding workers compensation”

That has created significant tightening and an increase in the number of carriers needed to fill the limit, with restructuring of placements via layering and quota sharing.

Typically what used to be a single carrier placement is now placed with several carriers, the broker observed.

The report, written by HW Kaufman Group’s corporate vice president of carrier relations Paul Smith, said that rates have risen on most lines of business irrespective of insured loss history, risk location or coverage breadth.

While the SME sector had been lagging prior to Q2, rates in that segment also accelerated during the quarter, at the same time as rate increases in middle market and large account spaces were exacerbated by Covid-19.

“It should be noted that larger accounts are experiencing rate increases far greater than SME or middle-market, however accounts of that size generally have greater latitude to adjust retained risk to offset sharp premium increases,” said Smith in the update.

He added that terms and conditions are also under increasing pressure as insurers look to limit exposure and create contract certainty.

Property

Burns & Wilcox reported that the property market moved further into the challenging hard market cycle in Q2 with more capacity reductions, increased underwriter discipline on changing terms, and double digit rate increases on clean accounts.

“This creates the need for layered and quota share programs which unfortunately adds additional premium levels to an already stressed client base,” said Barry Whitton, managing director of Burns & Wilcox Brokerage, Atlanta.

General and product liability

The broker said that rates have risen more modestly in the high single digits for most insureds across most industries, with the caveat that certain accounts will see greater increases based on loss history, industry and location.

Umbrella and excess liability

Umbrella is significantly harder, however, with rates increasing in double digits while limits are reduced, resulting in the need to layer and quota share placements to meet the contractual obligations of many insureds, said the firm.

It noted that at 1 July renewals policyholders were reportedly faced with the reality of “paying significantly more premium for less capacity with restricted terms and conditions”.

It added that some estimates suggest that $500mn in capacity has exited the marketplace – a 40 percent decline compared to the same time last year.

“The excess liability market is harder than it has been since the mid 80s with carriers cutting limits and raising premiums. In the E&S marketplace, very few industries are immune with insureds buying less limit solely driven by cost,” said David Gross, managing director, Burns & Wilcox Brokerage, Dallas.

Auto

The auto sector continues to face multiple challenges, with premiums increasing “at an alarming rate” and capacity being strategically managed by insurers.

“Larger fleets, truckers, tour and bus operators, emergency vehicle fleets as well as any accounts with poor loss experience will experience significant changes from structure with the introduction of buffer layers to meet the demand of umbrella insurers to increased retentions and rates,” stated John Woods, national practice leader for transportation out of Burns & Wilcox, Scottsdale.

Professional

And in professional lines significant increases are being seen across many individual coverages.

“The professional and executive liability marketplace continues to experience pockets of hardening, capacity reductions and Covid-19 specific exclusions. Notable segments include D&O, EPLI and medical professional liability,” said the firm’s professionally liability national practice leader David Derigiotis.

The report also suggested that evolving exposures related to the recent civil disruption will have a significant impact on police professional liability secured by most law enforcement agencies and related municipalities or relevant government entities.

“Related, some states are now considering legislation mandating individual police officers secure coverage for civil lawsuits alleging excessive force and other abuses,” it observ