It’s getting harder to find the coverage your clients need. Following years of rising losses and increasing litigation expenses, insurers continue to raise rates and reduce capacity.
As one of the broadest forms of coverage, the excess marketplace – and particularly umbrella policies – are the first to see rate increases, nonrenewals, and capacity reduction as providers respond to changing industry conditions.
How did we get here?
For years, insurers warned of rate increases caused by a variety of social, legal, and other factors. These factors include:
Litigation and “Nuclear Verdicts”:
The cost to settle claims has risen exponentially over the past several years. With the availability of third party financing, more plaintiffs bring protracted and sophisticated claims against businesses. As a result, lawsuits are more expensive and time-consuming to fight.
Additionally, new technologies and methods make it easier to trace blame for large scale events. While it’s advantageous to more accurately identify fault, establishing causal chains between events and those “responsible” serves to bring about spurious claims based on loose connections between a business or individual and an injury.
Over the past few years, the amount of damages paid out by corporate defendants has risen precipitously. In fact, the median dollar value of the top 50 U.S. claim settlements almost doubled between 2014 and 2018.
Large loss events lead to “nuclear verdicts” where the jury assigns disproportionately large awards to plaintiffs in a case against an insurer or corporate defendant.
When victorious, insurers and corporations still pay substantial legal fees and face public backlash.
Natural disasters, COVID-19, and other issues in the news:
The problems facing insurers are familiar. Record-breaking wildfires, a devastating hurricane season, and other natural disasters caused billions in damages.
Cat-exposed properties in particular caused significant losses for insurers and insureds alike.
COVID-19 exacerbated these issues. The lockdown and resulting financial crisis sped up market hardening, and the pandemic itself created new and unprecedented claims.
How the market is responding:
The result? Insurers responded by reducing capacity across the board, increasing rates in the double digits, and exiting from entire classes of business.
Insurers still renewing and writing new business are increasing rates and changing key policy terms. The situation is not that insurers are unwilling to lower rates or increase capacity, they are unable to do so without favorable conditions.
There’s no denying market conditions are challenging. Wholesalers and agents must leverage their expertise to aid clients in finding the right policy for their needs.
At MJ Kelly, our team works tirelessly to find solutions to overcome challenges in the marketplace. We leverage our expertise and wide network of carriers to find policies for the hardest to place risks.
If you need support finding the perfect policy for your client, don’t compromise. Let’s find what works for you!