Insurance leaders sound off on hardening market

How they're rebalancing their portfolios and tracking their exposures in this environment

Insurance leaders sound off on hardening market

Insurance News

By Alicja Grzadkowska

Before the coronavirus became the main topic of discussion, the insurance industry was focused on the hardening market in certain lines of business. In early 2020, Marsh reported that global insurance pricing was on the rise across all three major product lines – property, casualty, and financial and professional – in its Global Insurance Market Index. Moreover, as of September 2019, there had been eight straight quarters of global insurance price increases reported in the brokerage giant’s market index.

Top leaders in the US insurance market were unsurprisingly keeping a close eye on this market and their exposure to risks, especially after a catastrophe-ridden 2017 and 2018.

“From a CAT-exposed standpoint, we’re getting significant rate pretty much across the board – in California, Gulf states – and I think that’s now bleeding into other lines,” said Tom Clark, president of Nationwide E&S/Specialty, during a panel at the Kaufman Leadership Meeting in Detroit, MI. “We’re a large writer in California and a large writer in Florida, so we want to make sure that when it comes down to zip codes or counties, that we’re not over-indexed in any one of those locations. We’re really taking this opportunity to manage our concentrations.”

Clark noted that the Nationwide team was watching these exposures closely – “literally every day” – but so far, he thinks that the company has been responsible in how it’s managed that portfolio.

In fact, natural catastrophes remain top of mind and losses stemming from these disasters have a significant role to play in rates. Wayne Bates, president of Atain Insurance Companies, explained that managing exposures will be “very much about aggregate management and spreading risk.”

“This is going to be on the forefront of everyone’s mind,” he said, pointing to California wildfires specifically. “I don’t know that this phenomenon is going away, so we’re going to have to work out how to manage it.”

One of the other key areas of the market that was seeing some dislocation in 2019 was excess umbrella, where a lot of carriers were pulling back on capacity.

“We have not written a lot of CAT-exposed property over the years. The rates were not where our risk appetite was,” explained Chris Lewis, group president and CEO of IFG Companies. “We’re writing more property now, but what we are doing is we’re growing quite a bit in that excess where that capacity has really shrunk back, and we’re writing a lot more in the five X five layer for excess and umbrella.”

Within this hardening environment, the leaders highlighted that there’s a distinction to be made between small, middle market business and larger accounts.

“What we’ve seen through this year is that small middle market business, either on the binding side or on the small brokerage side, has seen low, single-digit rate increases,” explained Lewis, though he added that as loss severity trends for the industry overall continue to go up, that small middle market business is also going to see some firming.

Nonetheless, some lines of business have been seeing a rebalancing, with rates finally coming back to a reasonable place, including excess auto in the trucking business, according to Richard Schmitzer, president and CEO of James Rivers insurance. However, Bates pointed out that there was still some soft market mentality, even as the market on the whole was correcting.

“We can definitely tell that the market is moving in the right direction, but I think I need a couple more months of what we see now in our figures to know that the market is absolutely moving up for sure,” he said.

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