State of the Market: FALL 2022

While premiums continue to rise for most lines of business, the winds of market stabilization are in the air as we continue into the back half of 2022. Carriers are reporting growth and an increased risk appetite despite climbing rates.

Two of the most significant reasons for continued insurance pricing rises in the face of stabilization trends include pre-COVID-19 profitability challenges, as well as an increase in natural disasters, cyberattacks, economic uncertainty/inflation, and geopolitical shocks like Russia’s invasion of Ukraine.

Despite these challenges, market stabilization trends are indeed being observed, perhaps bringing optimism for a light at the end of the tunnel for the now years-long hard market cycle. Continued pricing moderation for certain lines of coverage, as well as competition for quality insureds among carriers may make it easier on clients searching for better terms and conditions to close out the year.

Umbrella

Nuclear verdicts continue to create headlines for Umbrella lines. Social inflation and litigation financing have also increased pressure on settlements, with defense attorneys looking to avoid unpredictable jury verdicts.

Organizations with large auto fleets, high-hazard products or significant premises’ exposures face the greatest difficulties in their Umbrella renewals.

Property

As we continue into the second half of 2022, the impact of property losses could be further intensified as businesses continue to deal with historic inflation trends on top of hurricane and wildfire season. Accurate valuations are a top-of-mind issue as insureds look to secure the coverages they need while insurers look to find premiums they are comfortable with imposing. Many carriers are utilizing services like Marshall & Swift to evaluate Statements of Values (SOVs) on a per-location basis. Rate increases have been moderate for insureds who can accurately prove their property valuations.

Directors & Officers

Directors and Officers (D&O) lines continue to see increases in both pricing and demand. However, signs of improvement are on the horizon. Heightened competition is leading to moderated primary D&O rates. We are now seeing low single-digit increases and some premium reductions. Insurance carriers are looking to retain their high-performing private company renewals. Excess pricing, which over the past few years has outpaced the percentage increases seen on primary D&O, has been flat to even negative in some cases.

Cyber

Cyber Liability lines continue to be the talk of the commercial insurance market. Rates are rising at breakneck speeds as the once niche line of coverage has reached historic highs in both pricing and demand.

URA Cyber Forecast

In projecting future systemic risks in the next 2-3 years, both brokers (48%) and carriers (30%) report cyber risk as their number one concern, followed only by economic risk (37% of brokers) and environmental/climate risk (21% of carriers).

Looking Forward

As we close out 2022, the signs of stabilization entering the market will be important to monitor closely. Lines in high stress and demand, like Cyber Liability, will also be critical to monitor continuously as the scope and severity of risks continue to climb.