Marsh Reports: Professional Lines and Property Premiums Continue to Vault Forward with Double Digit Increases

Global insurance prices continue to rise after a tumultuous 2020 and implications still rooted in the COVID-19 pandemic, according to the Global Insurance Market Index.

By: Craig Guillot | February 18, 2021

Driven by a few years of losses, a wild 2020 and the continuation of uncertainty related to the COVID pandemic, global insurance prices continue to rise, according to the fourth quarter 2020 results of the Global Insurance Market Index.

Commercial insurance prices grew by 22% in the fourth quarter of 2020, representing the largest increase since the index was launched in 2012. This compares to a year-over-year increase of 20% in Q3 and an increase of 19% in Q2.

The index is a proprietary measure of global commercial insurance premium pricing change at renewal and represents the world’s major insurance markets and comprises nearly 90% of Marsh’s premium.

What’s Trending, According to the Report

The challenging global insurance marketplace conditions experienced in 2020 are likely to persist through at least the first half of 2021, said Lucy Clarke, president, Marsh JLT Specialty and Marsh Global Placement, in a press release.

Christopher Lang, managing director, Marsh

“Although we are seeing signs that price increases are beginning to plateau in some lines, our clients continue to face tough trading conditions,” she said.

The results continue a quarterly trend that has persisted in recent years, said Christopher Lang, managing director at Marsh.

“It is definitely [being driven] by loss trends. The uncertainty of the COVID impact in 2020 has continued to drive uncertainty in the marketplace.”

While global property pricing rose 20%, global financial and professional lines were up an average of 47%, and casualty pricing was up 7%, compared to 6% in the previous quarter.

Composite pricing in the fourth quarter rose in all parts of the world for the 9th consecutive quarter. Also, all regions except LAC reported double digit increases, with the largest being in the United Kingdom (44%) and the Pacific (35%).

Looking at D&O

In regards to product lines in the U.S., property rate increases came down to 19% in the quarter compared to rate increases of 22% and 24% in the preceding quarters. Lang also noted significant rate increases in some lines like directors and officers liability insurance.

D&O rates rose significantly as carriers push for rate increases to secure profitability in the wake of recent years’ loss trends due to opioid litigation and derivative settlements, Lang said.

On a global scale, D&O rates are moderating but remain up between 25 and 50% in many counties, including the UK and Australia.

Additionally, excess liability lines have also seen significant rate increases, Lang said. While COVID had led to some backlogs in courts and less settlements, underwriters are increasing prices and curtailing limits.

Where Cyber Fits In

The rapid growth in ransomware and cyber attacks in 2020 has also led to significant rate increases in cyber liability insurance. The 17% pricing increase for U.S. cyber in the quarter was the largest increase since 2015. In the UK, cyber rates increased 30% due to the growing severity and frequency of claims.

The increasing number of cyber attacks, rising ransoms and the fact that some companies are buying less insurance is a “worrisome trend,” Tom Johansmeyer, head of PCS, said in Harvard Business Review.

“There just isn’t enough money in cyber insurance. And it’s hard to tell right now if there ever will be,” he said.

Uncertainty and the ‘New Normal’

As insurers move into 2021, the pandemic remains a large source of uncertainty. Deloitte noted in a report that COVID-19 could have long-term implications for the commercial insurance industry and noted several ways the crisis could unfold over the next one to three years.

The consultancy said we will see both opportunities and risks in the crisis, and that P&C commercial and specialty leaders should retention, growth and profitability levers to impact functional areas of distribution, underwriting, product, servicing and claims.

Now that many of the uncertainties have given way to a clearer picture of the new normal, underwriters have a greater understanding of post-COVID business, Lang said. The next challenges on the horizon likely include additional business insolvencies along with workers’ compensation and business interruption claims.

“I think the longer term impact we are all going to feel as the COVID disruption plays itself out is still a big to be determined, and we need to help our clients articulate their business model is moving forward,” Lang said. &

Craig Guillot is a writer and photographer, based in New Orleans. He can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.