State of the Market: 2022’s Second Quarter Underway
Property and Casualty
Property and casualty insurances’ hard markets are poised to continue as the first quarter of 2022 is now behind us. “Even with many carriers reporting improved loss ratios and record earnings, tightening capacity and rate increases are not quite behind us” (Amwins, 2022).
Carriers continue to de-risk their portfolio by limiting their exposure to high-risk property perils and locations including Florida, wildfire-prone areas in California and Colorado, and coastal properties (Amwins, 2022).
For the casualty market, “carriers remain comfortable with the rate environment, attachment points and deployed capacity on individual accounts” (Amwins, 2022). On the reverse side of things, insureds should focus on their own capacity, as well as compliance and control. These are the three major components within a risk financing structure for an entity.
Liability
Insurers are actually offering some additional limits but keeping a close a eye on the “continuation of large settlements and judgements from sympathetic juries as social inflation will continue” (Amwins, 2022). For businesses, limiting exposure to Employment Practices Liability (EPL) Risk should be a high priority. Frequency and severity are increasing rapidly. For example, the Residential Mental Health and Substance Abuse Facility industry saw 380 EPL claims over the course of 2015 – 2020, totaling nearly $37M in losses (Advisen, 2020). Businesses should keep this trend on their radars and practice caution, especially in highly litigious states like California. Having strong company culture that encourages a healthy team-like atmosphere is the best way to reduce risk and prevent EPL losses, which arise when unhappy employees sue a company for its employment practices.
Reinsurance
“Insurers and reinsurers alike are re-evaluating their risk exposures in loss-prone regions and lines of business and are either exiting entirely or significantly limiting their capital deployment in those areas” (Amwins, 2022). Reinsurers like MunichRe pay massive amounts of losses after insurers’ retentions are exhausted, so the reinsurers will also exit markets that primary insurers are struggling to produce underwriting profits in.
Healthcare
“Market conditions for healthcare liability in the U.S. remain challenging as the industry continues to face lingering effects” of the pandemic; staffing shortfalls are a primary concern (Amwins, 2022). “Challenging classes have seen limited capacity available in the excess layer. Additionally, The London markets and syndicates are adding a cyber exclusion to their medical professional liability policies to address the issue of silent cyber” (Amwins, 2022). Cyber risk is commonly added as an exclusion on many policies, which is why entities should purchase stand-alone cyber policies that can address business interruption exposures that tail cyber losses. Cyber exposure is currently the most dynamic and emerging risk that companies across all industries face. To circle back to the Residential Mental Health Facility industry, it saw 389 cyber losses totaling $962M in damages from 2015 – 2020 (Advisen, 2020). It was the highest severity and second highest frequency of loss, behind medical malpractice.
Amwins is a leading London specialty insurance distributor. This article offered highlights from the company’s recently published report of the risk markets for Q2/Q3 2022. You can read the full article HERE.
References
Advisen Insurance data, media, and Technology. Advisen Ltd. (2020, April 29). Retrieved January 31, 2022, from https://www.advisenltd.com/
Amwins: Q2/Q3 2022 state of the market. Amwins. (n.d.). Retrieved April 14, 2022, from https://www.amwins.com/resources-insights/article/q2-q3-2022-state-of-the-market#market-summaries