CRC: A&E insurance rate increases of 3% to 12% expected for high-risk classes

By Mia MacGregor

April 1 - (The Insurer) - Architects and engineers rates are flattening out this year in the excess and surplus lines market, with ample capacity and continued appetite for artisan contractors, CRC Group has said.

In a state of the market report on executive and professional risks, CRC said that A&E rate increases of 3% to 12% are anticipated for high-risk classes and jurisdictions such as New York, California and Florida.

“2025 will be very similar to 2024. The marketplace remains stable, with a slight slowdown in submission volume. There is still a large appetite for artisan contractors. Capacity is readily available as the product line is experiencing a softer cycle,” the wholesale broker’s report said.

CRC said that rates “are flattening out a bit” with A&E pricing lagging behind some other lines of business that are also softening.

“Some insurers are non-renewing accounts, primarily due to claims. A short list of insurance companies have completely exited this class within the last few months, and a similar number have entered the space. Newer markets generally do not target the problematic accounts that result in the exit of other insurers,” the report said.

The new markets are mostly MGAs with Lloyd’s backing looking for small, clean business.

“These are not market-changing players, but it has added some capacity,” the report said. “On smaller, clean business, competition is greater, and rates are expected to remain flat or rise up to 5%, while mid-market business rates will increase by 3% - 8%.”

In addition, a few A&E markets are carefully adding coverage enhancements to their policies.

D&O WRITERS’ CAUTION RISING

For D&O insurance, de-SPAC and SPAC activity is expected to rise due to the administration change, with premiums expected to decrease or stay flat.

For private and nonprofit D&O, CRC said that the soft market continues, and capacity is abundant due to new marketplace entrants, including MGAs and insurtechs.

The public D&O market remains competitive, with most insureds expected to experience flat to low single-digit reductions in primary premiums and excess layers remaining soft due to record capacity.

While there is no anticipation of a market shift, CRC noted that underwriters now express rising caution about further rate decreases.

Looking ahead, CRC highlighted several key risk factors in the D&O market, including foreseeable deregulation, the effect of company market capitalizations on probable settlement sizes, AI, IPO market fluctuations, and rising backlash against DEI and ESG policies.

Additionally, the report noted that the professional lines market remains soft across the energy industry, and D&O coverage remains particularly soft.

The employment practices liability (EPL) market continues to be soft, with abundant capacity from new entrants, including MGAs and insurtech firms. EPL pricing is expected to continue to be flat to under-expiring into 2025, according to the report.

Fiduciary liability capacity remains readily available, offering opportunities in niche accounts.

In the financial institutions market, capacity is limited for lead financial institution professional liability placements, especially for challenging classes, though increased capacity for real estate investment risks and asset managers offset this, according to the report.

M&A activity in private equity and venture capital is expected to rise, with stable pricing and generally flat rates.

CRC noted that some accounts have seen slight decreases to flat renewal premiums, which is expected to continue into 2025.