An overview of The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Index Q2/2023
Each quarter, The Council of Insurance Agents & Brokers releases its Commercial Property/Casualty Market Index. Here, we review the Q2 2023 findings, which utilize data from April 1 through June 30, 2023, and provide insights for the current quarter.
PREMIUM PRICE CHANGES
The second quarter of 2023 rolled in much like many of its predecessors as the commercial insurance industry experienced the 23rd consecutive quarter of premium increases across all account sizes. Coming in at an average of 8.9%, rates were up just slightly from the previous quarter’s 8.8%.
Medium accounts saw the biggest impact this quarter at 9.8%, with large accounts a close second at 9.7%, down from 11.8% in Q1. Small accounts rose to 7.2%, up a full percentage point from 6.2% the previous quarter.
Across various commercial lines, premium increases remained comparable to or slightly higher than the previous quarter. There were two lines of business that were outliers however: cyber and commercial property. The average increase for cyber came in at 3.6%, down from 8.4%, which is one of the strongest signs of relief for the line thus far.
Commercial property premiums reached 18.3% in Q2, the highest out of all lines of business. Increasing natural catastrophe losses and escalating property values were two prominent culprits according to respondents, who also pointed to the impact of reinsurance capacity. It’s important to note that catastrophe-exposed properties—with or without a favorable loss history—saw rates increases much greater than the average, and in some cases, coverage was difficult to find.
For workers compensation, favorable rates persisted as the line achieved its sixth consecutive quarter in negative territory coming in at -0.7%. Commercial auto reached a less favorable milestone this quarter with an increase of 10.4%, the 50th consecutive quarter with premium increases.
Commonalities among client concerns were high premiums and future premium increases, according to respondents. Some noted rate fatigue, which caused buyers to increase deductibles and lower limits to find relief in premium costs.
NOTABLE LINES OF BUSINESS
Commercial property premium rates continued to climb due to two key factors: natural catastrophes and reinsurance costs and availability.
In just the first six months of 2023, a series of severe thunderstorms in the U.S. caused approximately $34 billion in insured losses, according to Swiss Re, the highest ever insured losses in a six-month time frame. The number was “almost twice as high as the annual average natural catastrophe losses for the last ten years, $18.4 billion.”
Coastal property also was hit hard and underwriting capacity decreased, with several respondents mentioning that it was “very difficult to insure in the standard markets.” Property valuations continued to be an issue with carriers pressing for increases and higher deductibles.
Another factor was reinsurance, which added difficulties to the already challenged line of coverage. “Multiple respondents described carriers either cutting capacity or non-renewing existing accounts altogether due to how challenging it was to find reinsurance capacity,” according to the report.
On the other end of the spectrum, cyber insurance premium increases have begun to level out considerably compared to just two years ago when average increases reached a peak of 34.3%.
Gains in underwriting capacity were noted by 40% of respondents, up from the previous quarter during which 30% reported an increase, suggesting more carrier appetite for the line and additional competition.
Another consideration for slowing increases was the decrease in reported claims. In Q2, 22% reported a rise in cyber claims, compared to the significantly higher rate of 72% in Q1 2022. Whether mitigation techniques, heightened threat awareness, or decreased attacks were the main contributing factors is hard to tell, but the line is clearly headed in a more favorable direction as predicted in our previous reports.
At this point, the hard market is predicted to continue and impact most lines of coverage likely through the end of 2024. In response, business owners must employ resourcefulness and innovative strategy by engaging an expert insurance advisor who understands the intricacies of risk transfer solutions amid the challenges of securing optimum coverage for the best possible premium and, ultimately, peace of mind.