CRC REDY: Property moves into softer territory but excess/umbrella remained challenging in Q1

By David Bull

April 16 - (The Insurer) - Pricing in the E&S property insurance market continued its downward trajectory in Q1 despite the California wildfire losses, while the excess and umbrella market remained challenging overall, despite some moderation of price increases and alternative deal structuring, according to CRC Group.

The wholesaler’s latest REDY index data, published on Thursday, shows that pricing for property renewals was down 1.5% in January, down 1.3% in February and down 2.6% in March.

In commentary, CRC said that an average of 63% of accounts renewed at flat or reduced rates in Q1, while an average of 28% experienced modest single-digit increases.

“The extent of rate reductions varied based on account characteristics and loss history, with some accounts achieving reductions in the single digits and others realising decreases of up to 40%,” said the company.

It added that market competition has also driven meaningful improvements in terms and conditions for buyers.

“Insurers have responded by lowering deductibles, increasing sublimits, broadening policy language and offering more competitive pricing. While the focus on valuation has somewhat moderated, carriers remain attentive to the potential implications of ongoing tariff discussions,” said CRC.

It highlighted the benefit the property market is getting from a “notable” increase in alternative capital sources, including ILS and cat bonds.

“This influx has played a key role in supporting market stability. We anticipate that the downward trajectory will continue for the foreseeable future,” said CRC.

In contrast, double-digit increases continued on excess and umbrella renewals, with pricing up 15.8% in January, 15.7% in February and 12.3% in March.

However, CRC said it observed a “slight moderation” of excess casualty rates in the quarter, despite the ongoing rise of liability claim costs and nuclear verdicts.

“Fatigued by year-over-year cumulative rate increases, insureds sought alternatives to meet budget and risk tolerance requirements through aggressive marketing and the ability to leverage a competitive environment as the casualty market continues to grow,” said the commentary.

It added that the use of alternative risk transfer and creative program structuring has increased.

“As insureds continue to explore large, self-insured retentions, captives, and multi-year aggregated programs, E&S carriers will need to respond to retain primary and buffer layers. Requiring a higher level of risk tolerance and financial wherewithal, such solutions are not viable for all insureds; however, it is a trend worth noting,” said CRC.

It added: “While price moderation and alternative deal structuring brought welcome relief to some, the market remained challenging overall. The number of Q1 accounts with increases above 10% was significant; the upper range dominated by risks with adverse development, tough auto, and/or third-party bodily injury exposures.”

The broker said that carriers are continuing to re-underwrite more challenging risks with repricing, cutting capacity and restricting coverage.

E&O IN POSITIVE TERRITORY BUT EPL AND PRIVATE D&O NEGATIVE

The other line to see increases each month in Q1 was E&O, with average renewal pricing up 2.9% in January, 2.5% in February and 3.2% in March.

CRC said that miscellaneous E&O buyers experienced marginal increases on most MPL accounts in 2024 with additional price increases not likely in 2025, amid substantial capacity from both standard and non-standard markets, and MGA entrants disrupting rate increases.

In architects and engineers' E&O, the broker reported a stable marketplace with a slight slowdown in submission volume and continued large appetite for artisan contractors.

It added that rates are “flattening out a bit” as A&E pricing lags behind some other lines of business that are also softening, but certain disciplines remain harder.

“Rate increases of 3% to 12% are expected on larger accounts in certain jurisdictions such as New York, California, and Florida or difficult classes including geotech, structural or soil. Revenue growth results in premium increases in regions where construction is still booming,” said the report.

It added that accounts with a higher concentration of residential work, including condos, remain challenging.

“In many situations, clients dabbling in these projects have decided to walk away for insurance reasons. 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,” said CRC.

The broker reported that on smaller account business with a clean track record, competition is greater with rates flat to up 5%, while mid-market business pricing is up 3% to 8%.

Pricing in lawyers' E&O is “lower” said CRC, with an influx of additional capacity, even though many carriers expect to see a rise in claims and defence costs.

Although few insurers will entertain solo practitioners and smaller firms, the intermediary said pricing remains competitive.

In real estate E&O, the marketplace is “becoming more aggressive”, said CRC.

“There are new entrants on the real estate developers side leveraging endorsements to grant similar coverage offered by established carriers. We have seen even more aggressive competition for larger insureds from new market entrants,” the report added.

Private D&O pricing was down 1.6% in January, down 1.4% in February and down 0.5% in March.

“The private D&O market remains soft heading into 2025, with most accounts renewing flat or seeing modest rate reductions up to 10%, particularly for claim-free insureds with strong financials.

“Capacity continues to be abundant, fuelled by an influx of new MGAs and insurtech underwriting facilities, many of which are staffed by seasoned underwriters who have moved on from traditional carriers,” said CRC.

It added that competition was most intense on excess layers, with pricing “compressed” and carriers leveraging enhanced terms or flexible retentions to win business.

Employment practices liability (EPL) insurance pricing was down by 0.6% in January, by 0.3% in February and by 1.1% in March, with soft market conditions expected to continue, said CRC.

The company pointed to “abundant” capacity driven by new entrants including MGAs and insurtechs, which CRC said is mirroring trends in the private D&O space.

“Most clean risks are renewing flat or with modest rate decreases, and underwriters remain aggressive in pursuit of new business,” it continued.

But it pointed to growing social and political headwinds.

“Companies are quietly eliminating roles, scaling back programs and reshaping their messaging, which is creating a breeding ground for employee dissatisfaction. This environment is expected to lead to a rise in discrimination, retaliation and wrongful termination claims in 2025 and beyond,” said the report.

It added that underwriters are starting to increase retentions across the board. This trend is likely to persist through the year as insurers attempt to balance pricing stability with increased claims volatility.

CYBER PRICING TRAJECTORY HEADS DOWN AGAIN

In cyber, renewal pricing headed back into negative territory by the end of the quarter with reductions averaging 0.9% in March, compared to 1.5% and 0.7% increases in January and February respectively.

“Claim frequency remains at an all-time high. Business email compromise, third party litigation, supply chain claims and ransomware attacks all have increased by double-digit percentages,” CRC observed.

Despite the claims frequency, the cyber market continues to see new capacity, fuelling creativity, competitive pricing and the opportunity to broaden terms and conditions, CRC added.

“As reinsurance actuaries begin to comb through complete 2023 and early 2024 results, we are starting to see slight rate increases in targeted areas/classes to account for the noted loss frequency and severity given hardening hints to brokers and clients,” the broker concluded.