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Survey Report

Insurance Marketplace Realities 2022 Spring Update – Domestic casualty

April 7, 2022

The primary commercial liability marketplace remains stable, with workers compensation continuing to be the most favorable line of coverage for buyers.
Rate predictions: Domestic casualty
Trend Range
General liability Increase (Purple triangle pointing up) +4% to +10% or more
Automotive liability Increase (Purple triangle pointing up) +5% to +12.5% or more
Workers compensation Neutral decrease increase –2% to +4%
Umbrella liability – high hazard Increase (Purple triangle pointing up) <+20%
Umbrella liability – low/moderate hazard Increase (Purple triangle pointing up) <+15%
Excess liability – high hazard Increase (Purple triangle pointing up) <+15%
Excess liability – low/moderate hazard Increase (Purple triangle pointing up) <+10%

Key takeaway

The primary commercial liability marketplace remains stable, with workers compensation continuing to be the most favorable line of coverage for buyers. The umbrella and excess liability market has dramatically improved, with recent renewals yielding the lowest quarterly rate increases since the onset of the hard market. 

External forces could play a big role in insurer results and hence in the insurance marketplace. 

  • One of the big unknowns for the rest of 2022 is what impact increases in interest rates and inflation will have on insurance rates, both individually and in the aggregate.
  • Inflation, recently accelerating past 7%, is driving up claim costs in everything from medical bills to motor vehicle repairs and may outpace any investment income improvements resulting from anticipated Federal Reserve increases in interest rates.

Factors positively impacting the umbrella/excess casualty market include increased deployment of available capacity, new excess carrier entrants and capacity, and programs that were previously amended to mitigate rate increases during the height of the hard market now being better positioned to attract competition at renewal. 

  • We continue to trade risk in a two-tiered marketplace, where challenged classes and/or lower primary attachment points see greater increases.
  • Excess capacity is being procured at somewhat more competitive rates — particularly when compared to what we experienced in the first half of 2021.
  • Buyers have reduced their costs during recent renewals by procuring less excess coverage and increasing their retentions. We expect better conditions going forward.

Conversely, several broad factors continue to drive ongoing concern within the overall casualty market.

  • Inflation and its impact on claim costs
  • Interest rates
  • The marketplace facing considerable uncertainty around litigation in a post-pandemic world
  • Continued increases in third-party litigation financing
  • Continued social inflation:
    • Jury pools are desensitized to vast monetary values.
    • Wealth disparity has an impact on loss ratios: jury awards trend higher in geographic areas with greater levels of income inequality.
  • Carriers questioning and reevaluating reserve adequacy
  • Carriers asserting coverage limitations and changes in treatment of defense for high-hazard industries
  • Continued liberal class action certifications
  • Nuclear verdicts and catastrophic liability losses garnering significant punitive awards

Lead umbrella and excess liability renewal results have significantly improved with rates rising at a decreasing rate — a trend that began in Q2 2021.

  • The lead umbrella market has largely corrected itself over the last few renewal cycles with respect to pricing and attachment points.
    • Most programs have now been exposed to the challenged market for multiple renewal cycles and, while buyers still face rate increases, pressure to completely overhaul structure has significantly eased.
    • All markets remained focused on pricing adequacy and recalibrated attachment points, but overall, the umbrella/excess space has drastically improved.
  • While alternative competitive lead umbrella and excess liability capacity continues to be difficult to procure for high hazard/challenged risks, the landscape for low/moderate hazard classes continues to improve.
  • Capacity is returning to the excess liability market.
    • Typically, deployed capacity has increased to ~$950 million, up from ~$690 million in early 2020, based on WTW data and observations, as a result of legacy carriers recently utilizing more of their available capacity on excess towers.
      • Carriers prefer to deploy this additional capacity in multiple layers and not necessarily in a single tranche.
    • These capacity increases have brought a new level of competition.
      • With more available capacity in the high excess space, brokers are often oversubscribed.
    • The more flexible carriers are with respect to attachment and capacity, the more likely they will be to secure lines in the more attractive capacity layers.
      • Carriers seeking to participate in the high excess capacity space are being asked to offer needed capacity on mid excess layers on a ventilated basis.
      • Carriers unwilling to participate in the lower layers have offered additional capacity or lowered their price in the higher excess.
  • Carriers reluctant to deploy all their advertised capacity have begun to participate on various excess towers by offering larger limits.
    • While the jumbo layers of the past (i.e., $50 million – $75 million) are still uncommon, some carriers are beginning to again deploy large amounts of capacity throughout a tower, albeit in two to three tranches.
    • The net result has been reduced rate volatility in excess layers and, in some limited cases, rate reductions.
  • The trend toward supported lead umbrella capacity (i.e., primary carriers deploying umbrella capacity on the same programs) continues and, while there is still a strong unsupported lead umbrella market, leveraging the less volatile primary lines, especially workers compensation, is common.
    • In Q4 2021, the percentage of supported programs was in single digits, as moving large and complex programs multiple times in a short period is not optimal.
  • While underwriting and pricing guidelines remain somewhat fluid, they have stabilized with recent renewals as carriers are less reactive to market conditions and less likely to change their positions over the course of renewal discussions.
  • Communicable disease or specific COVID-19 exclusions are now commonplace but not uniform, creating further challenges in structuring excess liability towers.
  • Many clients have explored captive use.

Auto liability has remained unprofitable for insurers as claim payments remain on the rise. Insureds continue to see rate increases, program restrictions and restructuring of deductible thresholds.

  • AM Best reports that despite years of rate increases, the commercial auto sector continues to experience underwriting losses.
  • The Council of Insurance Agents & Brokers reports that commercial auto underwriters have now increased pricing, on average, for 40 consecutive quarters since the third quarter of 2011. However, during roughly the same period, commercial auto underwriters saw more than $22 billion in underwriting losses.
    • Social inflation is playing a major role in combined ratios remaining above 100%, despite several years of steady rate increases.
    • Increases in loss costs continue to outpace increases in rate/pricing and insurers’ gradual corrective underwriting actions.
  • Recently available data illustrates sources of this upward rate pressure:
    • The National Safety Council (NSC) estimates:
      • $241.9 billion in costs for motor-vehicle deaths, injuries and property damage in the first half of 2021
      • 31,720 motor-vehicle deaths for the first nine months of 2021, an increase of 12% from 28,325 during the same period in 2020
        • The above projection is the highest number of fatalities during the first nine months of any year since 2006.
        • This is the largest increase in fatalities since reporting began nearly half a century ago.
    • Federal Highway Administration data illustrates that vehicle miles traveled (VMT) in the first nine months of 2021 increased by 11.7 %, which equates to approximately 244 billion miles, from the same time in 2020.
  • As a result of increasing claim costs, umbrella carriers continue to demand higher attachment points, resulting in a stretching of primary limits or the introduction of excess buffers.
  • Continued upward rate pressure has pushed insureds to reevaluate deductible thresholds, implement corridor deductibles or explore alternative risk transfer (ART) solutions.
  • Increased frequency and severity of losses are the result of a multitude of factors, including more vehicles on the road covering more miles, distracted driving, rising medical expenses, commercial trucking driver shortages, legal climate changes and decaying public infrastructure.
  • A recent University of Missouri study confirmed that sleep disorders elevate crash risk in drivers, especially workers with shift worker sleep disorder (SWSD), who were almost three times more likely to crash than other drivers.
    • About 16% of Americans are shift workers, working outside the traditional 8 a.m. to 5 p.m. workday.
    • Drivers with sleep apnea and insomnia were 29% and 33% more likely to crash or almost crash, respectively, than the control group of about 4,000 volunteers around the country.
    • The CDC reports that being awake for 24 hours or more is equal to having a blood alcohol content of 0.10%. This is higher than the legal limit (0.08% BAC) in all states.
  • Risk managers recognize that drivers who text while operating a vehicle are 23 times more likely to become involved in a vehicle accident, so they are exploring risk control technology to help manage this exposure.
    • NHTSA data shows that more than 1,000 people are injured daily in accidents in which at least one driver was distracted.
  • Repurposing, a buzz word of the pandemic that came into currency as businesses modified job duties to meet changing demand, has impacted auto risks — e.g., in-house restaurant servers who are asked to deliver take-out orders using their own vehicles. Repurposing can raise the non-owned and hired exposure to both restaurant owners and their insurance carriers. Insureds should look at the employees’ personal auto policies to ensure that coverage under those policies would not be void in such circumstances.

Workers compensation renewal rates, depending on year-on-year payroll exposure variance, will continue to range from slight rate reductions to modest rate increases, as carriers continue to manage premium requirements with pandemic-impacted payrolls continuing to rebound. 

  • While we await full year 2021 data, the National Council on Compensation Insurance (NCCI) reports 2021 net written premium for private carriers declined through the first two quarters of 2021, compared with the first two quarters of 2020.
  • Loss ratios through the first half of 2021 were similar to those observed through the first half of 2020.
    • 2020’s net combined ratio for private carriers was 87, up from 85 in 2019 and 83 in 2018, marking the seventh consecutive year of underwriting gain, the fourth consecutive year of results under 90 and the third-lowest combined ratio since the 1930s.
    • Years 2018 to 2020 saw the lowest loss ratios in at least 30 years, with loss adjustment expenses (LAE) at their lowest levels since the early 1990s.
  • Workers compensation continues to be the casualty line with the most COVID-19 claim activity.
  • NCCI’s COVID’s Impact on WC report illustrates:
    • COVID-19 WC claims may be categorized as follows: indemnity-only, medical-only, and indemnity claims with an associated medical component (indemnity + medical).
      • Unlike the typical WC claim distribution, indemnity-only COVID-19 claims represent a significant share of reported pandemic-related claims in every state analyzed.
      • These indemnity-only claims explain some of the observed differences between the pre-pandemic and COVID-19 WC metrics.
    • On average, COVID-19 indemnity claims closed more quickly than non-COVID-19 indemnity claims. Indemnity-only claims are the driver.
      • These short-duration, wage replacement claims were not as prevalent in the WC system prior to the pandemic.
    • The ratio of paid to paid + case losses is lower for COVID-19 claims than non-COVID-19 claims.
      • To some extent, this may reflect higher insurer case reserves in the denominator of the ratio, given the uncertainty associated with possible future development on COVID-19 claims.
    • In almost every state, the average cost of a COVID-19 claim is lower than that for non-COVID-19 claims.
      • This may be impacted by the later-than-average accident date for COVID-19 claims.
    • Including COVID-19 claims, most states saw a decrease in total claims between accident years (AY) 2019 and 2020.
    • Excluding COVID-19 claims, all states saw a decrease in claims between AYs 2019 and 2020.
    • Countrywide, total claim counts decreased by 2.6% in AY2020, while non-COVID-19 claim counts decreased by 13%.
  • 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 claim costs.
  • The ongoing pandemic has reduced return-to-work opportunities and light-duty programs, which could increase claim duration.
  • Presumption legislation varies among states in terms of how and to whom it applies. The variation in presumption legislation is one of many factors driving differences in the distribution of COVID-19 claim counts.
  • Many excess workers compensation policies were historically designed to include batch language for communicable disease claims. With the advent of COVID-19 this coverage enhancement has been limited and, in many cases, excluded.
  • More ergonomic injuries may be expected as a larger percentage of the workforce is working remotely in spaces not designed for that purpose.
  • COVID-19 has created greater uncertainty in defining “the course and scope of employment,” with many workers now telecommuting.
  • A workplace outbreak of a communicable disease, such as COVID-19, is more likely to be covered by workers compensation if several factors are present:
    • Presumptive legislation creating a pathway for designated claims
    • An elevated risk of contracting the disease due to type of employment
    • Ease in identifying the time and place of disease transmission
    • State statutes and case precedents that favor workers compensation claimants
  • Telehealth, on the rise since the outbreak of the COVID-19 pandemic, continues to play a key role in workers compensation by providing more efficient access to high-quality medical care, mitigating medical expenses and lost time from work, and reducing claim severity.
  • New medical technology alone can inflate loss costs by 40% to 50% and is a key driver in mega claims.

Buyers should continue to focus on differentiating risk profiles, exposures and loss experience — with the support of analytics.

  • Analytic tools remain crucial to these efforts as they enable identification of risk financing options at a time when shifts in buying strategies and program structures remain common. These shifts demand risk quantification to help identify optimal program structures.


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 entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

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Executive Vice President
Primary Casualty Broking Leader — North America

Matthew Hannon
Head of Casualty Broking, West Region

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