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Market Forecast

Broker Forecasts Mixed Pricing Bag

Environmental, property and primary auto liability are some lines expected to see hikes.
By: | March 5, 2018 • 4 min read

Brokerage USI Insurance Services, which made headlines in December by merging with Wells Fargo Insurance, released a market forecast for 2018 that predicts a mixed bag in commercial insurance pricing. Out of 29 lines that the broker analyzed, nine of them could be in line for flat to increased pricing, according to the brokerage.

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Lines where insureds can expect significantly higher pricing include commercial construction project risk, which USI said could see premium price hikes of between 5 percent and 10 percent. Primary auto liability, which many predict will be an ongoing pain point, could also see increases between 5 percent and 10 percent.

Other lines expected to see increases are environmental (combined general liability), fiduciary liability, employment practices liability and medical malpractice, according to USI.

But the areas with the highest chance of increases are property and CAT property, which USI pegged at flat to 15 percent and 5 percent to 20 percent, respectively.

“Accounts with hurricane-related exposures and losses will almost undoubtedly face renewal situations with increased pricing, potentially less broad terms, and perhaps less available capacity,” according to the report, which was put together with the help of 17 USI executives.

The biggest question the USI report poses is whether the massive hurricane losses in the third quarter of 2017 will lead to a “regional or localized event versus an industry-wide event as it relates to pricing.”

Doug O’Brien, national casualty and alternative risk practice leader, USI Insurance Services

Owners of truck and auto fleets can still achieve favorable pricing, according to USI, if they deploy telematics to guard against the threats of fatigued and distracted driving.

The brokerage also said establishing longer-term relationships with underwriters should help ward off the price increases many industry players are predicting for this line.

One of the bright spots in the market is workers’ compensation, according to USI’s research. That line is being positively impacted, at least from the insurance buyer’s perspective, by ample capacity and in general, stronger risk mitigation measures being taken by clients.

The use of analytics, as in many other lines, not only holds promise but is also achieving results, according to the USI authors.

“Analytics relative to past and future loss data are becoming an absolute necessity to intelligently negotiate optimal pricing, program design and collateral,” USI detailed in the report.

“Predictive modeling has become a key underwriting tool for pricing and post-loss mitigation.”

Anecdotal evidence is that carriers are displaying a keen interest in international coverage, and that was also reflected in the USI findings.

“We have seen some carriers that historically did not participate on controlled master programs or in the international marketplace enhance their product offerings and aggressively price new business,” USI found.

“This has resulted in rates being reduced by as much as 15 percent at renewal,” the USI authors said.

In addition to workers’ compensation and international programs, lines expected to see continued price erosion include environmental (contractors’ pollution) — down up to 10 percent; public company directors’ and officers’ liability — pegged for a 5 percent to 10 percent decrease; reps and warranties — down 5 percent to 10 percent; and cyber, which despite concerns that many underwriters still don’t adequately understand the risk, could see price decreases in the 5 percent to 10 percent range, according to USI.

One area that drew extended commentary from USI was environmental. Describing the market as significantly mature, the USI writers noted that despite AIG’s announced departure from pollution legal liability coverage in 2016, other carriers were willing to assume the more than $1 billion in expiring AIG premiums.

“We have seen some carriers that historically did not participate on controlled master programs or in the international marketplace enhance their product offerings and aggressively price new business. This has resulted in rates being reduced by as much as 15 percent at renewal.” — USI Insurance Services, 2018 Insurance Market Outlook

The USI authors expect the environmental market to significantly outpace the overall commercial property/casualty market going forward.

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They estimate the market as being at more than $2 billion in premiums currently and in line for double-digit growth.

But then they add this caveat:

“If, after 30 years of actuarial data, AIG couldn’t be profitable in this space, what carrier might be next and, more importantly, when will the ‘musical chairs’ stop and rates start to rise?”

Adding to the uncertainty for this line, despite the capacity pouring into it, is the massive hurricane damage of 2017 and the possible environmental damage resulting from it.

“Frequency and severity of environmental claims are expected to continue in 2018,” USI said.

“With significant hurricane and flooding in 2017, toxic release and mold claims are still being adjusted, but these don’t seem to have much bearing on future coverage or rates, except that underwriters will examine more closely those risks with exposure to coastlines or flooding.”

The entire USI report is available online. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]