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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. &

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

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