Research

Marketplace Realities 2018: Casualty — Primary liability & excess

November 6, 2017

    The one thing

    With casualty markets likely looking to test their ability to push rate in early 2018, it is important to get in front of renewals and have open dialogue with your insurers on rate expectations well in advance of your inception date.
  • The casualty marketplace continues to experience a dichotomy of drivers influencing rate and leading to market stabilization. While factors such as an aging workforce, distracted driving and liberal class action certification have led to a material uptick in loss activity, historically high capacity and a pre-hurricane P&C combined ratio under 100 have pushed insurance carriers to aggressively pursue new business. However, with the losses to the industry from the recent storms expected to exceed $100 billion, earnings for most insurers will be in negative territory. We expect insurers will be unlikely to routinely grant rate reductions in casualty lines. While we do not foresee a casualty market hardening, we expect flat rates with possible single-digit increases to be the new normal into H1 2018. If history is a guide, however, the surplus of casualty capacity will likely prevent any spikes in rate.
  • De-sensitized jury pools and liberal class action certification continue to plague the industry and drive nine-digit catastrophic liability awards. As reported by Reuters, the average personal injury award has increased 88% in the past nine years, posing the question of how has this growth eroded the protection of an insured’s limit of insurance?
  • M&A activity has impacted capacity, leaving some insureds tasked with finding new partners. While capacity remains abundant, additional M&A activity could reduce capacity and put upward pressure on rate.
  • Several global insurers are communicating reserve concerns emanating from their U.S. commercial general liability portfolio. Should these concerns materialize into notable reserve inadequacies, the liability marketplace could face disruption similar to that experienced in commercial auto liability in 2016.
  • Price prediction

    General liability
    Flat to +3%

    Umbrella liability
    Flat to +3%

    Excess liability
    Flat

  • There is a growing belief that mid-cap policyholders are the road to profitability in the umbrella marketplace. Two major global umbrella markets are looking to make significant investments in the middle market space over the next 12 months.
  • The London marketplace continues to push product innovation, and Willis Towers Watson has recently released the Willis Excess Liability Lineslip (WELL), a unique and proprietary product using a Lloyd’s syndicated platform to deliver one of the industry’s broadest umbrella policies.
  • On June 19, in Bristol-Myers Squibb Co. v Superior Court of California, the U.S. Supreme Court ruled in favor of the plaintiff in a case that challenged a California Supreme Court ruling supporting the practice of forum shopping. This decision, which limits the plaintiffs bar from forum shopping, may be the most significant ruling related to products liability in years.
  • Cost-effective excess liability pricing combined with a challenging umbrella liability marketplace, has led insureds to continue to restructure their umbrella and excess towers to facilitate a shorter lead limit of $10–$15 million.
  • To secure best-in-class excess terms and conditions and enhance their carrier partner relations, insureds continue to look toward panels and similar facilities.