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Survey Report

Insurance Marketplace Realities: Casualty

2018 Spring Update on Commercial Insurance in North America


April 12, 2018

The balance of 2018 may experience incremental pressure on rate for all casualty lines, particularly auto liability and umbrella liability.

Price prediction

  Trend Range
Workers compensation: No change or slightly up/down –2% to +2%
Auto liability: Up +5% to +9%
General liability: No change or slightly up Flat to +4%
Umbrella: No change or slightly up Flat to +4%
Excess liability: No change Flat

Key takeaway

A challenged marketplace creates an environment where partnership accommodations are frequently requested. Those who make technical, analytically driven arguments will build leverage in their negotiations, generating the best outcomes.

With 2017’s catastrophic losses exceeding $130 billion and several casualty-centric combined ratios exceeding 105, many insurance companies communicated a strong desire to push their insureds for rate increases. However, to date in 2018, we have not seen a dynamic rate shift —at least not at the magnitude that insurers’ rhetoric implied. Yet, certain lines of business remain challenged. The balance of 2018 may experience incremental pressure on rate for all casualty lines, particularly auto liability and umbrella liability.


Two years of auto liability rate increases have yet to keep pace with loss trends and adverse development. For the 2017 calendar year, the industry projects a final auto liability combined ratio of 113. If accurate, this ratio would reflect a three-point increase year on year and would serve as a catalyst to push up auto rates through 2018.

  • Auto liability loss costs are significantly outpacing inflation. From Q3 2015 – Q3 2017, comprehensive loss costs for auto liability rose 36.6%.
  • Technology has led to both distracted drivers and a surge in repair costs for damaged vehicles. The cost to replace a 2016 bumper — with its added sensors and technology — has increased 130% compared to a 2014 bumper of the same model.

The National Council on Compensation Insurance estimates that the final 2017 workers compensation combined ratio will hold steady at approximately 94, representing the third consecutive six-point underwriting gain for an industry that has posted combined ratios of fewer than 100 only three other times since 1990.

  • Improvements in medical care and adoption of return-to-work programs have led to a decrease in lost time claims. These developments contributed to a 7.2% decrease in workers compensation loss costs in 2017.
  • Insurers, employers and employees are becoming keenly aware of the opioid crisis and the necessity to carefully manage the prescription of narcotics; 2018 will likely bring change to treatment protocols for patients in pre-pain, acute pain and chronic pain.

Both the retail insurance and reinsurance markets are starting to notice abnormal, negative development within their liability loss portfolios. This trend has led to several major umbrella and excess insurance carriers reducing their available capacity, particularly for large multi-billion-dollar corporations. Causes for this adverse development include:

  • The projected economic impact, including insured loss activity, for #MeToo actions is to exceed $2 billion.
  • Damage from the 2017 California wildfires generated more than 45,000 claims and $12 billion in losses. While many claims will start within the property lines of insurance, those carriers will look to subrogate against California utility companies that hold strict liability for any failure in utility poles — often the alleged proximate cause of the fires. California legislators are expected to amend current law to create an environment where utilities can afford to keep extending their services at a reasonable rate. Until clarity is brought, those with exposure to California wildfire litigation may find it difficult to procure insurance.
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