NEW YORK, December 5, 2022 — Amidst steady rate increases across most coverage areas for North American commercial insurance buyers over the last several years, recent trends suggest that rate increases are expected to continue albeit in a materially reduced manner, according to the Spring 2023 Insurance Marketplace Realities Report, by WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company.
Reduced rates are becoming increasingly available for low-hazard classes, in addition to moderate-risk ones where the client has sustained meaningful pricing and structural overhauls in the past two years. WTW experts are predicting lower percentage increases across most lines of commercial insurance. The long curve – the larger trend – has begun to bend in a positive way for commercial insurance buyers, while macro-economic factors are forecasted to exert upward rate pressure into 2023. Factors including inflation, the Russia/Ukraine conflict, continued supply chain challenges, and a volatile interest-rate environment will collectively exert mounting pressure on commercial insurance rates throughout 2023.
Many coverage lines have softened significantly, most notably cyber, which has swung from triple-digit rate increases down to flat to +25%. Casualty rates have come down to flat or single digit increases for liability, with rate decreases for workers compensation risks. Executive risks such as Directors & Officers (D&O) are undergoing rate decreases in many areas, with primary D&O increases no higher than +2.5%, a notable difference from the spring report, when increases were as high as 20% or more.
Beyond inflation, the second noteworthy macro factor impacting rates is Hurricane Ian. Many experts estimate insured losses at more than $75 billion, and while losses in personal lines are much heavier than commercial, the ultimate impact of Ian will not be known for some time, likely to initially affect the reinsurance market.
“We are finally seeing rates that are more closely aligned with clients’ specific risk profiles, a promising trend for buyers as we head into 2023. Softening commercial pricing is helping companies to manage their risk-transfer spend more effectively.”
Jon Drummond | Head of Broking, North America, WTW
Jon Drummond, Head of Broking, North America, WTW, commented: “We are finally seeing rates that are more closely aligned with clients’ specific risk profiles, a promising trend for buyers as we head into 2023. Softening commercial pricing is helping companies to manage their risk-transfer spend more effectively.”
| Property | |
|---|---|
| Cat-exposed | +15 to +25% |
| Cat-free | +10% to +15% |
| Domestic casualty | |
| General liability | Flat to +10% |
| Umbrella (high hazard) | Flat to +10% |
| Excess | -10% to +10% |
| Workers compensation | –5% to Flat |
| Auto | +3% to +10% |
| International | Flat |
| Executive risks | |
| Directors’ and officers’ public company (primary) | -7.5% to +2.5% |
| Directors’ and officers’ private / not-for-profit (overall) | -10% to +7.5% |
| Side A / DIC | -15% to Flat |
| Errors and omissions (large law firms) | +5% to +10% |
| Employment practices liability (primary) | Flat to +10% |
| Fiduciary (financial institutions) | +5% to +25% |
| Cyber | |
| Cyber | Flat to +25% |
| Political risk | |
| Most risks | Up to +45% for host-country sub-limit increases in sensitive countries |
| Terrorism and political violence | |
| Terrorism and sabotage | +10% to +40% |
| Political violence | +20% to +45% |
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