WTW: Auto liability seeing highest rate rises in 'highly segmented' North America casualty market

By Chris Munro

May 5 - (The Insurer) - North American casualty pricing trends remain highly segmented with auto liability set to see the greatest rate rises at up to 20%, while at the opposite end of the spectrum workers’ compensation clients could continue to secure reductions with others seeing a slight rise, according to WTW.

In its latest Insurance Marketplace Realities, WTW said there are certain trends that drive the dynamic within each segment of North America’s casualty market.

These include the product line itself, along with industry sector, exposure profile, loss experience and jurisdiction, the broker said.

Of all the segments within the North American casualty market, WTW believes rates will rise the most in auto liability during 2025.

“Auto liability continues to be a challenging segment,” WTW said.

“The market has experienced 34 consecutive quarters of rate increases, with Q4 2024 seeing an average rate lift of +11.68%.”

WTW that trend is being driven by several factors, including nuclear verdicts, litigation trends and higher reinsurance costs.

“Additionally, we are operating in a two-tier market, where rates and conditions differ significantly between high-hazard and low-hazard risks.

“The market dynamics are further complicated by the need for higher retentions and attachment points, the adoption of new technologies and evolving legal and regulatory landscapes,” WTW said.

Conditions within the umbrella and excess liability market also remain challenging, according to the broker.

WTW said that high-hazard classes have long contended with umbrella and excess pricing and capacity constraints.

However, increasingly even moderately rated risks are now subject to significant limit reductions, coverage restrictions, and pressures on minimum premiums.

“This difficult market is further exacerbated by the ongoing absence of broad tort reform and a litigation environment marked by aggressive legal tactics and an uptick in nuclear ($10+ millions) and thermo-nuclear ($100+ millions) verdicts,” said WTW.

Further challenging the market are what WTW described as “material reserve increases” for liability lines from prior accident years, although as the broker highlighted, workers' compensation reserve releases have provided some balance.

Within primary casualty, WTW noted that the sector continues to experience bifurcated results.

Those accounts that have low to moderate risk along with favorable loss histories are mostly seeing what WTW described as “modest single-digit rate increases” across most lines of business.

As the broker noted in its report, carriers have signalled the likelihood of pushing through general liability (GL) rate increases.

Those rate rises are largely being driven by the increase in nuclear verdicts across premises liability, products liability and other tort exposures, WTW said.

The broker cited recent data that indicates more than 50% of new GL claimants are now represented by legal counsel.

According to WTW, over two-thirds of those obtain legal representation within two weeks of an incident occurring.

“Despite these concerning trends, GL rate increases have remained relatively moderate — ranging from 0% to +8% over the past 12 quarters, and more recently, staying within 0% to +5% over the last five quarters,” WTW said.

Workers’ compensation is the only North American casualty segment where WTW forecasts rates could come down for some clients, with the broker predicting a range of -5% to +2%.

“Workers’ compensation continues to stand out in the casualty insurance landscape, with WTW’s loss-sensitive clients experiencing 15 consecutive quarters of rate decreases, averaging –4.91% in 2024,” said the broker.

WTW noted that the National Council on Compensation Insurance (NCCI) has predicted that carriers’ combined ratios will range between 83% to 90% for 2024, which indicates continued profitability for carriers and soft market conditions.

“This prolonged favorable period raises questions about when the market might turn, with medical inflation and slowing interest rates as potential drivers, though the ultimate catalyst may not be line-specific,” WTW said.