Recently, I was honored to serve as Chair of the Zywave Casualty Insights Conference in New York. The keynote speaker was Hartford’s Mo Tooker, who provided thoughtful and engaging comments on trends in the current casualty market. Several panels reviewed the state of the market, the power of modeling, using claims information to drive decision making, and the critical need to tackle fraud in civil litigation.
Today’s challenging casualty insurance market
When asked by moderator Glen Curly, former leader of excess liability for Nationwide, to describe the casualty insurance market, I used the word “exhausting.” Why? Because today, brokers and clients must be hyper-diligent in their efforts to find competitive options. Geography, industry, client size, and other factors influence what’s available.
Recently, in an attempt to get alternatives for a New York-based contractor, I approached more than 30 insurers. Only two offered viable terms for renewal. This is not an exception but rather the norm today for many clients in tough classes of business or in rougher judicial areas such as New York, California, Texas, Georgia, or Louisiana.
The shift to excess and surplus lines: A permanent change?
A recent report by The Insurance Insider publication showed the growth in excess and surplus (E&S) premium has been steady over the last five years. Indeed, medical malpractice and auto insurance premiums placed in the E&S market have more than tripled since 2020, while liability premiums have doubled in that time. Several of the conference panels questioned whether this fundamental shift in premiums away from the standard market was permanent and if those E&S insurers are truly equipped to handle the claims that will inevitably follow.
The impact of general liability insurance policy exclusions
An audience member from outside the insurance industry asked our panel to address what seems to be a recent trend among carriers to narrow or eliminate coverage from general liability (GL) insurance policies. The questioner pointed specifically to assault and battery as an example. One of my fellow panelists suggested that it is in everyone’s best interest — client, insurer, and broker — for “specialists” to underwrite coverage rather than having them in a GL policy.
While acknowledging that certain coverages such as cyber insurance and employment practices liability (EPLI) are no longer part of GL and now are on specialized forms, I pushed back by noting that GL insurers seem to have no idea when and where to stop.
I reminded the audience that clients have lost GL coverage for a variety of items such as communicable disease (how quickly everyone forgot about COVID-19), asbestos, silicosis, EIFS (exterior insulation and finish system), mold, and pollution. These and other perils are either fully excluded or available at a cost from other underwriters.
At what point does a GL policy cease to provide any useful coverage? Here was my point to the audience: insurers need to keep in mind that, when pushed hard enough, strong clients will find alternative solutions and not subject themselves to purchasing a winnowed-down policy form.
Balancing client needs and insurer stability in a volatile market
It would be misleading to think my view was solely one-sided against the insurance carriers; far from it, actually. I was vocal about the need for all of us to find balance. We must agree that the long-term financial health of insurers is critical to the economy and our clients’ ability to have stable businesses.
My leave-behind for the day was to remind everyone that insurers provide access to emergency capital at a reasonable rate, which allows businesses of all shapes and sizes to recover from property damage, bodily injury, loss of data, allegations of corporate negligence, and injuries to their own workers. Without this system of insurance, companies would need to borrow large sums of money at much higher rates to rebuild buildings or settle lawsuits — assuming lenders would feel comfortable doing so.
The insurance industry is far from perfect. But I believe most attendees left the conference with a better understanding of why premiums have risen, what they can expect going forward, and what we all can do to stabilize the market from future shocks — up or down — in cost and/or availability of coverage. Simply put, clients must keep investing in safety and risk management for their people, drivers, facilities, data, and reputation.
Were you at the conference, or do you have a question about the current state of the casualty insurance market?
