The Sweet Smell of Slight Relief Comes to the Property/Casualty Market

An overview of The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Index Q3/2022.

Each quarter, The Council of Insurance Agents & Brokers releases its Commercial Property/Casualty Market Index. Here, we review the 3Q 2022 findings, which utilizes data from July 1 through September 30, 2022.

Premium Pricing Changes

For the third quarter of 2022, the commercial insurance industry reported its 20th consecutive quarter of premium increases across all account sizes. Respondents noted that increases were “slight” or relatively “flat” despite an average premium increase across all account sizes coming in at 8.1%, up from 7.1% in Q2.

Tightening, increased scrutiny, and decreased carrier appetite were the order of the day this quarter as medium-sized accounts lead the way with increases in Q3 at 9.0%, up from 7.3% in Q2. Large accounts saw a slightly smaller increase at 8.8%, up from 7.5%, and small accounts held steady at 6.4%, up from 6.3%.

Across all lines of business, premium prices were close to being flat with the exception of commercial property and cyber. The average premium increase came in at 7.0%, up from 6.1% in the previous quarter.

Workers compensation market softening continued as rates decreased -0.7%, marking the fourth quarter of the last five to land in negative territory. The report noted that “conditions for this line seem to have returned to their prepandemic trends as seen between Q1 2015 and Q1 2020, with low prices and straightforward underwriting.” And a sigh of relief was heard from respondents who described the line’s underwriting as “flexible” and “loose.”

Other key numbers this quarter were:

  • 21 – the number of consecutive quarters that saw premium increases for all lines of business
  • 45 – the number of consecutive quarters that commercial auto premiums increased

Notable Lines of Business

COMMERCIAL PROPERTY

The big story for this year remained commercial property as natural catastrophes and inflation continued to place upward pressure on the line. Despite slight easing, 95% of respondents agreed that inflation had a significant impact regarding market trends overall and commercial property in particular.

Natural disasters in 2022 have caused an estimated $115 billion in insured losses so far, according to a December report from Swiss Re Group, which is well above the 10-year average of $81 billion. Losses from Hurricane Ian alone are estimated at $67 billion, according RMS.

Adding to the pressure, at the end of the year, the country stared down bomb cyclones (events that intensify at a rapid rate) and an Arctic outbreak. Coupled together, a reported 250 million people were under severe weather alerts ahead of the Christmas holiday. An analysis of any resulting damage and claims will be reflected in our fourth quarter report, but one thing is sure, losses will only serve to compound the pain for business owners and an industry that is already stressed.

COMMERCIAL AUTO

Commercial auto premiums continued to climb in the third quarter, making it the 45th consecutive quarter of increases. Respondents pointed out that the main impacts affecting the line were a result of inflation, notably from higher payouts due to increases in the cost of repairs and vehicle replacement costs. Further restrictions on capacity also were noted for the line.

Claims for commercial auto were on an incline as a result of drivers returning to the roadways after the pandemic. Increasing traffic from retail shoppers and workers getting back to the office provided greater congestion for roads and highways.

CYBER

Cyber continued to be a challenge in third quarter with increases remaining in the double digits at 20.3%, though down considerably from the previous quarter at 26.8% and its peak in Q4 2021 at 34.3%. Premiums were more favorable for those businesses that have placed recommended controls in place. However, respondents reported that “clear problems remained, such as higher deductibles, and the addition of sublimits to ransomware and cyber extortion coverages, even if the account had a clean loss history.”

Demand continued to increase for the line at 78% as business owners became more aware of the need for cyber coverage as a result of reports and news coverage of ransomware and other types of attacks increasing in number and cost to recover.

The value of an expert insurance advisor remained the difference for clients navigating the continuing hard market. Respondents noted that market conditions resulted in “an opportunity to show their value to clients by assisting them with implementing robust risk mitigation techniques to bring premiums down.” News of increased premium rates and tightening conditions can be balanced for business owners only by instilling confidence in knowing they’ve done their due diligence, have the best counsel, and have secured the best coverage possible for their risk management needs in current market conditions.