Marsh: Casualty only line to show increase as US composite rate declines

By David Bull

April 28 - (The Insurer) - Insurance rates in the U.S. declined by 1% in the first quarter, with casualty the only line of business remaining in hardening territory led by 16% increases in umbrella and excess liability, according to the Marsh Global Insurance Index

The decline was driven by property insurance, where the index was down 9%. In contrast, U.S. casualty rates rose 8% in the quarter, contributing to a 4% global increase in casualty pricing.

According to Marsh, this was due largely to the severity of claims and large jury verdicts, or nuclear verdicts, tightening capacity ability as underwriters continued to reduce their line sizes.

U.S. property rates fell for the third quarter in a row after being in hardening territory for several years.

The pace of decline accelerated from 4% on Q4 2024 and 1% in Q3 2024.

The broker said the dynamics in the business line are being driven by increased insurer competition and decreasing reinsurance costs.

It noted that insurers are typically offering coverage enhancements to clients, including higher limits, revised definitions and lower deductibles in a bid to avoid making greater concessions on rates.

“Underwriting scrutiny of submission data typically decreased, though the broader economic environment may renew insurer focus on valuations.

“Clients with high loss activity and submissions viewed as lower quality by insurers generally faced less favorable renewals, although the environment remained more positive than in previous years,” said Marsh in its update.

It added that insurer appetite was up for risks in the warehousing, food and beverage, and technical risk sectors as it noted that many buyers weighing up insurance costs considered self-insurance, captives or alternative risk transfer as long-term solutions.

US CASUALTY UP 12% EX WORKERS COMP

In more detailed commentary on U.S. casualty, Marsh said that rates were actually up 12% if the still soft workers’ compensation line of business is included from the index.

Even in the workers’ compensation area, which has benefited from strong historical profitability and stable performance, the report said that concerns continue over increasing reserves medical costs

It noted that auto liability continued to be challenging for insurers amid larger jury verdicts nationwide and rising repair costs.

Although general liability rates were relatively stable, with average increases of around 2%, larger increases were experienced in loss-affected industry classes such as real estate, hospitality and public entities.

Meanwhile, coverage restrictions continued to increase, including around forever chemicals such as PFAS exclusions, biometric restrictions, and cyber exclusions.

The hardest area overall continued to be the umbrella and excess liability market, where risk-adjusted rates were up 16% in the first quarter, accelerating from 15% in Q4 2024.

Marsh said that rates for lead umbrella programs with favorable loss experience and low-hazard exposure were up by 12% to 15%, while those with adverse loss development typically faced changes to limits, attachments, coverage and/or pricing, where rates were up by 30% or more.

The report highlighted retrenchment from some carriers, including four London insurers in 2024, while insurers also moved away from concentrating capacity on single towers because of increased frequency of severe claims against a backdrop of concern over the impact of third-party litigation funding.

FINPRO CONTINUES DECLINE

The contrast between pricing dynamics in the U.S. casualty market and liability lines in the financial and professional lines (finpro) segments, were rates continued their decline.

Overall finpro was down 3%, consistent with the last three quarters, but moderated from the bottom of the current soft cycle when rates dropped 10% in Q2 2023.

Directors and officers rates were down 5%, a fall described by Marsh as stabilizing, with singe-digit decreases in both primary and total program rates as the gap between primary and excess layer pricing narrowed.

It noted that some insurers cut their participation in mid-to-high excess layers, opted out of renewals or reduced capacity.

Fiduciary insurance rates declined 2% in the quarter as insurers faced uncertainty due to lawsuits, including excess fee litigation related to retirement plans, health plans and pharmacy benefit managers.

Errors and omissions rates were flat while financial institutions rates were down 1%, said Marsh.

Meanwhile, cyber insurance rates decreased 4%, marking the eighth successive quarter of reductions, according to the company’s latest pricing data.

It noted that capacity increased, with several new insurers and additional facilities entering the market.

“Clients used premium savings to purchase higher limits, reduce retentions, shorten waiting periods, and broaden coverage,” said Marsh.

Rate reductions and increased capacity come despite the frequency of cyber events and claim notifications in 2024 highlighting the “growing complexity” of cyber risks, where a single point of failure can affect thousands of organizations, the report observed, as it also pointed to generative AI as an emerging concern.