KRISTA CINOTTI: Thanks, Jon. I'm really looking forward to discussing middle market and what's going on in the marketplace.
JONATHON DRUMMOND: As we look at the corporate and middle market space, what's going on in the market? What are we seeing carriers doing? How are buying styles and clients' trends as relates to how they purchase insurance evolving? What have you seen within your portfolio?
KRISTA CINOTTI: So I've seen some changes across the board. I think, as the property market developed over time in the past few years with the hardening of the market, we saw that trickle into middle and affecting program structure a lot. I think now we're seeing that ease a bit, but it's easing slower than what's happening on the large property side.
So with that happening and program structure changing, we're still seeing some capacity being pulled in the property market space for middle. We're also starting to see the hardening of the casualty market. I think that's also happening in large account space. So I think we're getting hit on both sides. And we're not fully seeing the impact of the softening property market, which then makes it a little bit difficult for the middle market buyer when they are now being introduced to some different program structures, and they've probably seen before, and that they're not really used to buying as far as shared and layered property or even some SIRs on the casualty side.
JONATHON DRUMMOND: Why do you think there is that dichotomy there, where capital providers are coming in and providing capacity and really pushing down the marketplace in the large account space, but when they go and move over to middle market, there's a different posturing? And perhaps they're not pursuing that business as strong.
KRISTA CINOTTI: I think it's because there's probably a different reinsurance buying style for middle market. I think when you think about carriers that are taking 100% of the risk, I think what they're doing on the back end of that risk is a little bit different than what you'd see on a shared and layered deal. I think also, the middle market is a little bit delayed in reviewing what they had on their books from a property perspective as far as the cost for capacity. I think large property carriers are getting a lot more per million per capacity than the middle market spaces.
So I think the carriers are still reviewing that and saying, if I have a limited amount of capacity, even if I have capital reinsurance, anything behind it, I still want to get the right price for that capacity. So I think some of the capacity in the middle market space was extremely cheap. And I think we're still seeing the impact of that, even though the market is softening a bit.
JONATHON DRUMMOND: Changing course a little bit to touch upon what you mentioned earlier and started laying a groundwork for on excess casualty. Excess casualty has been distressed for a few years in the large account space. I guess first question would be, is that true? Has it been distressed for a couple of years in your space?
And then I guess another perhaps follow-up question that we can talk a little bit about is just around social inflation. And so we hear this term "social inflation" for years. Carriers have been citing it as a reason that they're not able to generate the returns that are necessary within this line of business. Tell us a little bit. What's going on? How long have you seen it? And how does social inflation perhaps impact middle market?
KRISTA CINOTTI: So I'd say we're starting to see the turn in the excess market now. I know a few years ago, we saw a pretty big correction on the lead market. And I think that was a warranted correction. When you looked at the pricing and the attachment points, it made sense that there was a correction made.
I think now on the excess, we've corrected, where we're not really seeing 700 per mil, where we did years ago. Our minimums are a lot higher. But the pricing is still fairly cheap for the capacity being deployed on the excess side.
So what we're seeing now is where markets used to differentiate a little bit between middle and large risks as far as cutting capacity, meaning they were putting up blocks of 25 for middle, we're seeing that change drastically now. We're seeing markets make the blanket statement that they're not going to put up more than 15. They're picking where they want to attach.
A lot of them don't want to attach below 10 million. So that's impacting middle market pretty significantly. Because when you think about, the volume and the resources in the middle market space, it's a little more strategic need when we're placing our excess. Because it's smaller blocks of capacity that now need to be deployed and renegotiated.
JONATHON DRUMMOND: So with these smaller blocks of capacity, are they willing to attach at the same primary limits as historically they had? Or are they also pushing for higher primary limits? I mean, take auto, for example. What do we often see a middle market, a client purchasing for a primary auto, and where the umbrella is willing to attach? And when does that change?
KRISTA CINOTTI: So when there's a heavy fleet or, or when there's a mix of more trucking risks, we're seeing the attachment points being pushed higher. If it's a smaller DPT fleet, we're still seeing attachments at one. But we're really now looking at buffers or 2 million attachment point with some FAC behind it. So again, back to the strategic nature of the brokers and middle market, they have to be prepared to deal with this from a market perspective.
I'd say from a GL perspective, it's really affecting the prime ops exposure. So when you think about heavy foot traffic, we're starting to see that attachment point push up to 2 million, which is really affecting our real estate book, some more commercial retail, and definitely hospitality. So we're seeing higher attachments there as well. And then above that small blocks, like a lead five, we're not seeing lead 10s or 25s in that space for the prime ops either.
JONATHON DRUMMOND: We've kind of chatted a little bit about risk and buying trends and really what capital providers are doing from a product line standpoint. But if you look at things from a geography standpoint, or if you look at things from an industry vertical lens, are there carriers that are trying to come in and come out of geographies? Are there carriers that are trying to come in and come out of different industry verticals and different risk profiles? How does how does that influence the dynamic in the marketplace?
KRISTA CINOTTI: So I see that there's a flood of markets coming into the cleaner risks. When you think about financial institutions and tech business, a ton of markets want to write that business. So what we're seeing on that side is an extremely competitive market, which is equally as difficult as a hard market in some of the industries. Because the negotiations are tougher. You have more markets interested. You have to really manage the market and manage expectations. So we're seeing large double-digit reductions in those industry classes.
On the flip side, I think we're seeing a lot of markets pull out of the real estate space from a guaranteed cost primary perspective on the casualty. So we're limited there from program structure and market capabilities, especially, again, when you think about hospitality and the things that go into that, with some of the SAM exposures, some of the professional exposure. And then again, human trafficking is a big issue in the current market.
So I think we're seeing markets pull out of the tougher side, which gives us less option. And then the cleaner business, we're seeing a flood of markets wanting to write that and needing to have that expertise to write that business.
JONATHON DRUMMOND: I think our audience here has a real strong desire to understand, well, what does it mean for them? As we look out for the next few quarters, what could we expect from a rate perspective and in any type of guidance on what our clients should do to be able to manage outcomes more effectively? And listen, no doubt, I just heard you say that there's already two markets, whether it's a hard market, harder risk, or lower profile, low hazard, and a different number of carriers pursuing that. So maybe give our audience a little bit of perspective in the next couple of quarters about what they could expect at the renewals.
KRISTA CINOTTI: Yeah, I'd say for property, we're hoping to keep it single-digit increases. I would say we're still probably going to see some changes in structure and capacity-cutting continuing. So I'd say to prep for that. Information is key going forward. I think the days of just renewing things without information, without having the right valuation for property, some of the additional information - inspections are key on the property side for middle market. A lot of the markets want to go out and see the properties.
So being open to that, the scheduling for it, and having the data will be key to keep that pricing down and to keep the capacity up. From a casualty perspective, I think on the primary overall, we're probably still going to see, on average, single-digit increases. I think in the tougher classes of business, we'll probably see double-digit and then maybe some program structure changes as far as moving away from guaranteed costs and looking at some SIR options.
So from that perspective, again, I think the data is going to be very important, especially when you're thinking back to that real estate and hospitality example, details about any safety procedures you have in place, to keep some of those exclusions that we're seeing across the board coming out in the market. But I'd also say, be open to some new program structures that maybe clients weren't looking at before. It might be a better way to buy insurance, going forward, and to make sure that they're seriously considering those program structures and looking at the total cost of risk and the best way to buy insurance, going forward for their program.
JONATHON DRUMMOND: Well, with that, I just wanted to say, Krista, thank you very much for your time today on, again, our first podcast of the year in 2025.
KRISTA CINOTTI: Thanks, Jon. I appreciate the opportunity to share my insights on middle market.
JONATHON DRUMMOND: A lot of valuable insight as it relates to the marketplace, some trends that we could expect, and some reminders is that we should look to alternative program structures, really evaluate how we're financing risk, and ultimately, be open to these new ideas. Thank you, everybody, and we'll talk to you soon.
NARRATOR: Thank you for joining this WTW podcast, featuring our latest global market commentary. WTW offers insurance related services through its appropriately licensed and authorized companies in each country in which WTW operates. For further authorization and regulatory details about our WTW legal entities operating in your country, please refer to our WTW website. It is a regulatory requirement for us to consider our local licensing requirements.
The information given in this podcast is believed to be accurate at the time of publication. This information may have subsequently changed or have been superseded, and should not be relied upon to be accurate or suitable after this date. This podcast offers a general overview of its subject matter. It does not necessarily address every aspect of its subject or every product available in the market.
And we disclaimer all liability to the fullest extent permitted by law. It is not intended to be, and should not be, used to replace specific advice relating to individual situations. And we do not offer, and this should not be seen, as legal, accounting, or tax advice. If you do intend to take any action or make any decision on the basis of the content of this podcast, you should first seek specific advice from an appropriate professional.
Some of the information in this podcast may be compiled from third-party sources we consider to be reliable. However, we do not guarantee and are not responsible for the accuracy of such. The views expressed are not necessarily those of WTW. Copyright WTW 2025, all rights reserved.
