In an industry that values stability and predictability, the COVID-19 pandemic has introduced uncertainty that makes it more important—but more challenging—for retailers to understand market conditions. Against this backdrop, this State of the Market departs from its traditional forward-looking format to instead provide a consolidated, moment-in-time report to help our retailers gain the knowledge they need to retain accounts, write new business, overcome challenges and capitalize on opportunities that do exist as the second quarter of 2020 nears its close.
As the pandemic continues to run its course, one thing is becoming crystal clear: the loss impact on the market will be profound. In May, Lloyd’s reported that it will pay at least $3B and as much as $4.3B as a result of the far-reaching impacts of COVID-19. In comparison, this amount is approximately equal to 9/11, or the combined impact of hurricanes Harvey, Irma and Maria. The estimated amount our industry as whole will pay in covered claims varies widely, with projections ranging from $40B to $100B; however, losses could rise further if the current lockdown continues into another quarter. In addition to impending losses, the overall state of the U.S. economy, possible resurgence of COVID-19 in the fall and winter, property damage from riots, and predictions of a higher than average hurricane season (with reduced time to prepare as a result of the pandemic) will continue to impact market conditions. Finally, a significant market shift is being seen in reinsurance treaty renewals. June 1 renewals, a key date for Florida-focused Property and CAT Property business, saw an average increase in excess of 25%.
Insurers are also concerned about long-term impact of the pandemic on claim activity that was not accounted for in their rate development or policy wording. Though communicable disease exclusions and other policy form modifications are being added on policies in almost every segment, there are lawsuits and legislative measures proposed to provide coverage to anyone who purchased business income insurance regardless of policy language. “If successful, this would have a devastating impact on our industry,” says Harry Tucker, AmWINS’ National Property Practice Leader. “Our industry’s leaders are actively working both individually and through association groups to educate regulators on the issues this would cause, including potential bankruptcy for our industry.” State regulatory bodies are also looking to enhance eligibility for workers’ compensation, especially for frontline employees. These enhancements include requirements to cover COVID-19 testing and, if and when available, immunization. We feel confident that the carriers will prevail, but this will be a distraction and likely entail legal battles in a number of states.
According to the Council of Insurance Agents and Brokers (CIAB), Q1 2020 marked the 10th consecutive quarter of increased premium pricing by account size. As we near the end of Q2, the market hardening seen over the past 18 months has not slowed and carriers
are taking ongoing and additional steps to improve profitability.
Property – We anticipate that Commercial Property rates will continue to increase between 10% and 25% year over year, depending on the level of CAT-exposure, and 30% or more if the account is CAT-exposed with losses. “Insureds can find some consolation in that rates may level out toward Q4 2020 as the businesses that took the brunt of rate increases at the beginning of the cycle come up for renewal,” Tucker added.
Casualty – “In the Casualty space, capacity restrictions within the Excess sector are the most prominent,” said Tom Dillon, AmWINS’ National Casualty Practice Leader. “The trend of reduced capacity and increased rate started prior to the COVID-19 outbreak, but effects of the pandemic have added additional pressure to not only rate, but the terms carriers are willing to offer.”
Professional Lines – Regardless of whether the account is impacted by COVID-19, underwriters are tightening the reins across most lines of coverage in the Professional Lines sector as losses are expected. Insureds are seeing substantial rate increases with minimal ability to negotiate terms. “Underwriters are asking many questions about how the insured is handling their business and workforce during the pandemic and reopening phases,” says David Lewison, AmWINS’ National Professional Lines Practice Leader.
The following section presents a holistic view of highly impacted risk and industry segments. Select a segment below to read the latest market updates.
The hard market is here and likely not going anywhere for a while. However, just because the standard market is demanding large premium increases and cutting limits does not make it easier to move business to the E&S marketplace. With capacity restrictions creating placement challenges and causing the need to create additional layers to obtain equivalent coverage, accounts need to be marketed earlier, especially for larger placements. To succeed in this environment, retailers need to partner with a wholesale broker who understands the market, has established relationships with the right underwriter at each company, and who can help provide the best, most comprehensive submission in order to achieve the most favorable result.
Click here for an in-depth look at the top COVID-19 issues impacting the Builders Risk marketplace.
For an in-depth look at how COVID-19 is impacting the Professional Lines sector, click here.
Click here for an in-depth look at emerging exposures and how to get the best results for your Healthcare and Senior Care clients during the pandemic.
For more details on how to navigate the Small Business sector during COVID-19, click here.
Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
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