The COVID-19 pandemic’s repercussions include many new risks and insurance issues, according to a report by USI Insurance Services.
In its Mid-Year 2021 Commercial P&C Insurance Market Outlook, USI highlights the hard market conditions spurred by the pandemic, natural catastrophes and other market pressures.
Property remains the largest loss drag on the P&C sector’s profits, according to report author Robert Meyers, senior vice president and property and casualty leader at USI.
“Recently, the industry and property owners have faced unprecedented challenges, and insurance companies are responding with increased deductibles, reduced capacity, and changes in coverage,” Meyers wrote.
Sustaining low attritional loss levels and presenting underwriters with strategic loss-mitigation strategies can help property owners reduce their insurance costs, the report said.
“Most lines of casualty insurance continue to face the usual challenges of selective underwriting, rate increases, capacity reductions and restrictive coverage terms and conditions,” Meyers wrote. “Umbrella/excess insurance is still the most challenging casualty market, with average rate increases of 15% to 25%.”
Meyers said that while new market capacity is being introduced, it will take time for that capacity to have a beneficial impact in terms of initiating competition and moderating rate hikes.
Workers’ compensation claims activity and frequency have dropped due to more employees working from home, changes in job duties and furloughs, the report found. However, that trend will likely change as employees return to the workplace.
“Ultimately, COVID-19’s long-term impact on workers’ compensation remains to be seen,” Meyers wrote. “Rate decreases may be moderating in various states, and rate increases are not as high as expected in others, including in states with COVID-19 presumptive liability.”
Rates for primary layers of cyber insurance have risen 25% to 50% when insureds have a complete submission, optimal ransomware controls and no material loss events, USI found.
“Facing increased underwriter scrutiny, insureds will have no choice but to tighten cyber loss controls and improve their risk profile before insurance companies will even consider providing coverage,” Meyers wrote. “Companies should work with a broker who takes the additional step of improving their risk profile for better and more affordable coverage.”
Directors and officers
Second-quarter premiums are up 10% to 50% for public-company D&O insurance – which is actually an improvement from the latter part of last year’s 20% to 100% hike, the report found. Private companies reported a similar trend.
“The optimist’s take: this relative stability should help D&O buyers that effectively differentiate their financial, operational and governance risk profile in a positive manner obtain better-than-average results,” Meyers wrote.
Other lines of executive and professional insurance
“Premium increases continue across the board, from 5% to 75%,” Meyers wrote. “For fiduciary liability coverage, plans with significant retirement plan assets are taking substantially larger retentions and facing larger increases in premium.”
Upward pressure on premiums and retentions continued for employment practice liability, crime, kidnap and ransom, and professional liability, USI found.
“Overall, the executive and professional risk (EPS) market should continue to be firm heading into the last two quarters of 2021, as overall risk uncertainty continues to weigh on underwriters,” Meyers wrote.