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Survey Report

Insurance Marketplace Realities 2021 – Domestic casualty


November 18, 2020

Due to various factors continuing to negatively impact loss trends and underwriting profitability, the commercial liability marketplace remains hard.

Rate predictions

Rate predictions: Domestic casualty
  Trend Range
General liability Increase (Purple triangle pointing up) +7.5% to +15%
Automobile liability Increase (Purple triangle pointing up) +8% to +15%
Workers compensation Neutral increase (yellow line, purple triangle pointing up) Flat to +4%
Umbrella liability: High hazard Increase (Purple triangle pointing up) +50% or more
Umbrella liability: Low/moderate hazard Increase (Purple triangle pointing up) +30% or more
Excess liability: High hazard Increase (Purple triangle pointing up) +150% or more
Excess liability: Low/moderate hazard Increase (Purple triangle pointing up) +75% or more

Key takeaway

As a result of various factors continuing to negatively impact loss trends and underwriting profitability, the commercial liability marketplace remains hard, especially for umbrella/excess liability.

The casualty marketplace presents a range of challenges and utilization of analytics remains an important tool for navigating these challenges.

  • Renewals are taking much longer to complete, with participation from many more carriers needed to replicate expiring umbrella/excess liability limits.
  • In some cases, we have seen buyers choose to reduce the total excess limits capacity they purchased.
  • Securing coverage for wildfire, concussion/traumatic brain injury (TBI) litigation, sexual assault and molestation (SAM) and most recently communicable disease is proving more and more difficult.
  • Differentiating risk profiles, exposures and loss experience is more important than ever, and analytic tools continue to be crucial in this effort.
  • Utilization of analytics enables buyers to identify trends in their loss experience and exposures, create sound go-to-market strategies and quantify alternative and optimal program structures.

The umbrella/excess liability marketplace continues to experience extensive disruption. Deteriorating loss trends continue to negatively impact underwriting profitability driving underwriters to require continued, significant rate increases, to narrow underwriting appetites, to reevaluate coverage grants, and to require changes to program structures, i.e., reducing available capacity and requiring higher attachment points.

  • The North American liability marketplace continues to be impacted by significant catastrophic liability losses stemming from many sources, including auto accidents, SAM, TBI, wildfire, active shooter events and opioid claims. The result is unsustainable combined ratios industry-wide — a primary driver of hardening rates.
  • Loss severity is increasing along with the percentage of claims that are litigated. The median value of the top 50 U.S. verdicts in 2019 is estimated to be $88 million, which would mark a 62% increase from 2018’s median value of $54.33 million. We have seen the median value of the top 50 U.S. verdicts increase by 318% since 2014. The recent numbers have become the benchmark for future claims and are the result of aggressive litigation, litigation financing, the impact of changing attitudes of juries and social inflation. (Data from Chubb and Lewis Brisbois, a legal defense firm)
  • Nuclear verdicts (greater than $100 million) and large settlements, even in jurisdictions perceived as conservative, are another major driver of the current market.
  • Carriers are reducing renewal capacity on lead umbrella and excess layers but have not been providing corresponding premium relief.
  • Total available/advertised global capacity has been reduced from $2.2 billion in 2018 to $1.4 billion in 2020. However, typically deployed global capacity is approximately $690 million as a result of carriers reducing the amount of available capacity for certain types of risks/hazard classes because of the volatile nature of the U.S. litigation environment.
    • The reduction in global capacity is a result of carrier consolidation through mergers and acquisitions in recent years (accounting for roughly $235 million of the decline), market exits and withdrawal of capacity by some carriers ($500 million) and underwriting restrictions ($700 million). (Data source: Willis Towers Watson)
  • Insureds with large commercial fleets are experiencing continued pressure on automobile liability attachment points and are seeing exorbitant increases in lead umbrella pricing. These increases are also putting tremendous upward pressure on excess layer pricing.
  • Rate increases on lead umbrellas have been larger when incumbent carriers non-renew (as opposed to reducing deployed capacity) forcing the insured into the market.
  • Because of the reduction in overall market capacity, towers with $100 million or more in total capacity have been seeing larger average excess rate increases than with towers of less than $100 million.
  • Casualty insurers who offer both primary programs and umbrella/excess are increasingly leveraging their lead umbrella capacity to secure positions on the insureds’ primary programs. Some carriers that have not historically offered umbrella/excess capacity are now doing so to protect their primary position from competition.
  • Underwriting and pricing guidelines remain fluid, with carriers continuously reacting to market conditions and, at times, changing their positions over the course of discussions with insureds.
  • Carriers continue to cap per-project/per-location aggregates and are thoroughly scrutinizing or excluding construction/contingent coverages.
  • Communicable disease exclusions have been added to most renewal programs in exposed industries (e.g., hospitality, retail and health care) since the COVID-19 outbreak.
  • Accounts expiring with lower excess pricing (i.e., price per million) have experienced greater percentage rate increases, as carriers have become more focused on adequate rates for capacity regardless of attachment points.

Auto liability continues to be unprofitable for insurers as claim payments remain on the rise. Insureds continue to experience rate increases and program restrictions.

  • AM Best reports that 2019 was the auto segment’s worst accident year in 10 years as losses approached $4 billion.
    • Commercial automobile insurance has not generated a combined ratio under 100 since 2010.
    • The 2019 combined ratio stood at 109 despite double-digit, year-over-year increases in earned premiums as the growth in incurred losses and loss adjustment expenses (LAE) has outpaced earned premium growth.
  • Willis Towers Watson data illustrates 17 consecutive quarters (dating back Q3 2016) of rate increases.
  • The median cost of a single fatality in 2019 was $5.1 million, up 14% from 2018 and up 182% over the past 10 years.
  • As a result of increasing claim costs, umbrella carriers continue to demand higher attachment points, resulting in stretching of primary limits or introduction of excess buffers.
  • Increased frequency and severity of losses are the result of a multitude of factors, including distracted driving, rising medical expenses, commercial trucking driver shortages, changes in the legal climate, and decaying public infrastructure.
  • While accident frequency may decline as a result of reduced traffic due to COVID-19 shelter-in-place requirements, severity could rise because of vehicles colliding at higher speeds. Also, more businesses are providing delivery services as in-store foot traffic has declined.
  • Rate pressure is causing some insureds to consider higher deductibles and/or corridor deductibles to mitigate rate increases.
  • On a positive note, estimates show that 2019 U.S. traffic fatalities decreased 1.2% to 36,120 compared to 2018 even though vehicle miles traveled (VMT) increased by 0.9% (data from the National Highway Traffic Safety Administration (NHTSA)’s Fatality Analysis Reporting System.)
  • In another positive trend, the NHTSA estimates 1.10 fatalities per 100 million VMT in 2019, down from 1.13 fatalities per 100 million VMT in 2018. If these estimates are reflected in the final data, the fatality rate per 100 million VMT would be the second lowest since NHTSA started recording fatal crash data.
  • Drivers who text while operating a vehicle are 23 times more likely to suffer a car accident. NHTSA data states more than 1,000 people are injured daily in accidents in which at least one driver was distracted.
  • Sleep apnea/deprivation continues to be a key factor in accidents, with over 43% of the workforce indicating they are sleep deprived. This is a major issue for risk managers as employers have been found legally liable for damages by not properly managing fatigue and sleep issues.
  • “Repurposing” has become a buzz word associated with the COVID-19 outbreak, as businesses attempt to modify job duties to meet changing demand (e.g., restaurant employees now delivering take-out orders in their own cars). Such repurposing can change the non-owned and hired exposure of both the restaurant owners and insurance carriers. Companies should also look at the employees’ personal auto policies to ensure coverage under that policy would not be void.

Workers compensation rate decreases are flattening and we are beginning to see slight increases in response to high severity/excess losses.

  • 2019’s combined ratio for private carriers was 85, up from 83 in 2018, marking the sixth consecutive year of underwriting profit and the third consecutive year of results under 90 (data from the National Council on Compensation Insurance (NCCI)’s State of the Line Report and other NCCI publications). However, we believe this stretch of profitability could be under threat due to COVID-19 claims. Presumptive legislation regarding COVID cases could play a large role.
  • The 2019 net written premium for private carriers was $42 billion. Once state fund premium is added in, the net written premium total is $47 billion, a slight decrease from 2018.
  • The NCCI estimates that average indemnity claim severity for accident year 2019 will be 4% higher than accident year 2018. This trend is in line with the projected countrywide average wage increase for 2019.
  • NCCI estimates that lost-time claim frequency for accident year 2019 will be 4% lower than accident year 2018, which is in line with the long-term average frequency change of -3.8%.
  • Over the last five years, auto accidents accounted for 28% of workers compensation claims above $500K.
  • California Assembly Bill 5, effective January 1, 2020, set a new standard for gig economy workers, and many independent contractors could be reclassified as employees covered by workers compensation. These additional expenses will put pressure on gig economy business models and their insurance programs.
  • New medical technology along with increased use of existing technology may inflate loss costs by 40% to 50% and are a key driver in mega claims.
  • While opioid use is declining, it accounts for approximately 25% of workers compensation prescription dollars.
  • Workers compensation continues to be the casualty line of business with the most COVID-19 claim activity. The circumstances around coverage are complex, vary by state, and are impacted by new presumptive legislation.
  • In-force policies may include payroll estimates based on pre-COVID-19 assumptions. A downward exposure restatement may put upward pressure on rate. However, insurers have been willing, on a case-by-case basis, to negotiate minimum premium requirements on existing policies and rate changes on renewal programs.
  • Excess workers compensation policies address “communicable disease” variously, with some policies including aggregation clauses. Each policy must be reviewed to confirm how nuances could affect coverage. Regardless of coverage available within current policies, at renewal carriers are becoming more restrictive.
  • COVID-19 will potentially further reduce premium volume in 2020 due to higher unemployment levels and fewer available work hours for those who remain employed.
    • COVID-19 immediately caused job declines in leisure, hospitality and travel-related industries. Manufacturing and distributors of durable goods also experienced a reduction in jobs due to a decrease in customer demand.
    • While strong job growth occurred in health care, grocery stores and home delivery businesses, these new jobs may be temporary.
    • The ability to effectively telecommute has helped to maintain employment stability in the professional services sector.
  • Higher unemployment levels may put downward pressure on claim frequency, as employees may be reluctant to file workers compensation claims.
  • The broadening of workers compensation coverage has the potential to increase claim frequency.
  • As a result of COVID-19, deferral of elective treatments and medical care for other non-acute conditions may extend claim duration and put upward pressure on costs.
  • The pandemic has reduced return-to-work opportunities and light-duty programs, which could increase claim duration.
  • While less driving and more telecommuting may reduce the number of motor vehicle accidents, more ergonomic injuries may be expected as a larger percentage of the workforce is working remotely in areas not primarily designed for work.
  • COVID-19 creates greater uncertainty in defining “the course and scope of employment” with many workers now telecommuting. Employers may have to add neighboring states to their policy, modify class codes, and establish guidelines and protocols for working from home.
  • The probability that a workplace outbreak of a communicable disease, such as COVID-19, will be covered by workers compensation depends on several factors:
    • Presumptive legislation creating a pathway for designated claims
    • An elevated risk of contracting the disease in certain types of employment (risk inherent in the occupation)
    • How easy it is to identify the time of and source of transmission
    • How easy it is to attribute symptoms to a given communicable disease ("prevailing factor")
    • The broadness of state statutes and case precedent
  • Telehealth, which has seen a large increase in utilization during the COVID-19 pandemic, continues to play a key role in the workers compensation industry by providing more efficient access to high-quality medical care, mitigating medical expenses and lost time from work, and resulting in reduced claim severity.
  • The deterioration of the global economy has affected nearly all companies. Credit officers are likely to take a more conservative approach in establishing collateral requirements.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.


Head of Broking, North America

Matthew Hannon
Head of Casualty Broking, West Region

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