Market Remains Hard, But Report Sees Improvements in Coming Months

While the North American commercial property-casualty insurance market remains hard, buyers can expect improvements in the months ahead, according to Willis Towers Watson (WTW).

WTW's "2021 Insurance Marketplace Realities Report" does suggest that buyers are likely to continue facing upward pressure on pricing across most lines of business for the rest of 2021, primarily due to the increasing severity of losses that has been the hard market's primary driver.

But property insurance increases aren't as steep as predicted last fall, WTW reported, and increases are expected to be lower than predicted last fall for 10 lines of insurance and about the same as expected across almost half the lines. Only a handful of lines should see higher increases, the report said, with some of those just slightly higher than predicted.

The market has become more orderly and predictable, according to the WTW report, with rates approaching technical adequacy in some lines and sectors as new capital has entered the marketplace.

"With higher rates attracting new entrants and coaxing some capacity to come off the sidelines, rate increases are beginning to decelerate, or at least stop climbing," Joe Peiser, global head of broking at Willis Towers Watson, said in a statement. "It's still a hard market, but to a large degree, the hard/soft market cycle is—or will soon be—proven again."

WTW sees the development of a two-tiered market—one for better risks, the other for poorer ones. While each will pay higher premiums in 2021, those in the better tier will see less significant increases, the broker said. "Strict underwriting and cautious development of capacity on certain risks persist as the underwriting community grapples with systemic changes in the risk landscape," the WTW statement said.

The broker reported that nonchallenged property insurance accounts predicted premium increases fell from 15 percent to 20 percent in the fall to 5 percent to 15 percent now. Predicted general liability increases remain at 7.5 percent to 15 percent.

Predicted casualty excess premium increases have been trimmed from 150 percent for high-hazard buyers and 75 percent or more for low- or moderate-hazard insureds, to 100 percent or more for high-hazard and 50 percent or more for low- or moderate-hazard risks.

Workers compensation continues to avoid major increases, with some buyers experiencing flat renewals. Auto rate increases remain between 8 percent and 15 percent. Directors and officers liability increases are decelerating, from 20 percent to 50 percent for public companies and 10 percent to 50 percent for private and nonprofit organizations in the fall, to 10 percent to 40 percent now for public organizations and 5 percent to 45 percent for private/nonprofit organizations.