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Insurance Marketplace Realities 2022

Insurance Marketplace Realities 2022

As the commercial insurance market continues to be challenging, we are reminded of one of the oldest and most basic elements of the marketplace: the rule of supply and demand, as a gradual softening provides a welcome reduction in premium rate hikes. Increased capacity given by insurance companies is increasing supply, which has the effect of driving down costs.

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Insurers' prices for commercial lines of business (CLIPS)

For the commercial insurance market, where we do business, we've made some rate estimates in the pages that follow in Insurance Marketplace Realities (i.e., the mid-market, national and global segments). In addition to current price fluctuations disclosed by insurers, we review them while compiling our predictions for the next year. All sectors of the commercial P&C market are included in Willis Towers Watson's CLIPS retrospective look at commercial P&C rates based on data received directly from carriers underwriting P&C business. Larger purchasers are more susceptible to insurance premium changes than smaller buyers, according to our experience. CLIPS members include include of the top 10 commercial lines businesses and the top 25 insurance groups in the United States of America.

Commercial insurance premiums in the United States rose in the second quarter of 2022, according to the most recent CLIPS survey. Looking back over a year, the report states that the total commercial price change reported by carriers increased by over 6% in the first quarter of 2020, then spiked upward to nearly/above 10% in the second through fourth quarters of 2020, and then declined to just below 8% in the first quarter of 2021 before settling at just above 6% in the second quarter of 2021.. Increases in the lines that have experienced the most challenging market circumstances have slowed.

See the most current CLIPS report for further information.

What factors have contributed to this increase in supply? Of course, the tough market is a major contributor. Insurers and other investors in the insurance market may earn a higher return on their capital commitments by charging higher premiums, which improves the rate adequacy. Markets have begun to "correct" themselves, at least from the perspective of insurers, after many yearly cycles of rapid and sometimes unrelenting rises. Systemic increases in risk from heightened cat losses, societal inflation, and growing exposures in sectors ranging from cyber to liability have not gone away. The term "stability" occurs often in this publication's forecasts and observations about what we expect in 2022.

Cyber liability and fiduciary liability insurance are two notable outliers to the normal increase in insurance premiums. According to our projections for 2022, rates for cyber insurance will rise much more rapidly than they already have. The rule is not violated in this instance. The company's losses are increasing and its capacity is becoming more constrained. Increased demand and decreased supply have led to an increase in pricing.

A basic economic rule is guiding us toward stability, so for the most part, things are looking up. A straightforward market isn't always the case here. As we noted in our previous issue, the "two-tiered marketplace" that we discussed is still a reality in many industries: circumstances are favorable to more desirable risk, and more difficult for less desirable risk. There has never been a more difficult task for a risk manager than identifying the market risks that face their company. The information must be presented in a clear and appealing manner, and more data and better data are anticipated. Thanks to improvements in data analysis and presentation software, prospective insurance customers have an advantage.

This is where the new marketplace concept comes into play. Risk analytics are the foundation of the new insurance industry. Unique and increasing information on risks throughout the spectrum and better access to data by insureds about their individual vulnerability is the basis for this new insurance model. Furthermore, analytics relevant to the financing of risk include incorporating business input such as risk tolerance and strategic objectives and overlaying actuarial analysis across different lines of business to determine the ideal balance between risk retention and risk transfer..

COVID-19 has also contributed to the emergence of a new insurance market. We've realized that the virtual world has certain benefits and that we can conduct much of our job online. Meetings can be held more easily, and for insurance purchasers, the C-suite may have a significant impact on the negotiation process. Because underwriters are located all over the globe and in locations that risk managers may never have visited, these discussions may be held electronically. Insurance sector workers, including underwriters, brokers and risk managers, are reaping the advantages of commuting to their homes rather than to the workplace.

Zoom meetings and fancy analytics aren't the only part of the job that may be stressful. It's not at all. The risk manager's job is becoming more and more difficult as the world of data and analytics expands. At the same time, nothing can replace the personal connections that are the foundation of the insurance industry, and those personal connections are enhanced by face-to-face interaction. Many people are complaining about a new kind of workday: one that never ends. You're constantly on, therefore there's no such thing as an off-hour. To what extent is industry reacting to this challenge? Young people in the sector confront a very different landscape than those who grew up in it.

To summarize and back to the focus of this article, insurance premiums will continue to rise — at least in the near future. Although the majority of consumers will be paying more, the marketplace's outcomes should be less unpleasant.. Many towns still have a two-tiered market, but the penalty of being in the higher danger tier isn't as significant as it used to be. For better or for worse, supply and demand will continue to influence our sector. During the second and third quarters of 2021, we might see rate reductions as early as Q2 of 2022 if supply continues to improve. Cyber and other troubled sectors of business will continue to face challenges far beyond 2022 notwithstanding this improvement.

As a result of the extensive research conducted by our subject matter specialists, we are confident in our ability to assist you in navigating the current market conditions.

Perspectivist and retrospectivist

As of this issue, the number of lines forecasting rate drops has been 0 for the fourth time in a row. There was an eight-fold rise in the number of lines expecting either flat renewals or a combination of hikes and declines Another encouraging indicator for purchasers is the expectation that 18 lines will have price hikes that are lower than those forecast by our analysts in the spring. The respite from double- and even triple-digit hikes in umbrella and excess casualty policies is as noticeable as it is pleasant. D&O price hikes are moderating and, for the first time in a long time, some D&O purchasers may experience no price rises at all.

However, cyber insurance is one significant exception to the pattern, as premium hikes have surged from 10% to 30% to 25% to 50% in the spring and now for 2022, from 50% to 150%.

A gain in capacity has boosted supply, and the rules of supply and demand have helped the insurance buyer. For the most part, these data tell a straightforward narrative.

From our 2022 forecast, here are a few highlights:

Buyers of better-risk properties might anticipate a 2% to 10% hike in property rates. Rate rises of 15% or more are expected for properties with low occupancy, which is a continuation of the recent reduction in rate increases.

There was a minor easing in general liability predictions: from +7.5% to +15.0%.

Also, auto-rate projections have dipped slightly: from 5% to 15% (down from 8% to 15%).

* Excess liability forecasts for high hazard risks have risen by 15% to 30% or more, while those for low/moderate hazard have remained steady or increased by 15%.

To put it another way, a range of -2 percent to +4 percent is being considered for worker's compensation.

There is a noticeable improvement in the marketplace for 2022, but consumers will still have to pay extra for their insurance in the majority of situations.

Market trends: upward, downward, or a combination of the three*

Annual rate comparisons are carried out twice a year There is a problem with IMR Decreases Increases Mix/flat the latest in new and improved technologies for the next season Middle-market businesses have been included to the 2022 edition. Marine hull/liability and marine freight are distinct lines in the 2021 spring update numbers. This is the first time that the statistics for 2021 include projections for the bio sciences and alternative risk transfer. Managed care mistakes and omissions have been included as a distinct line of business for the 2020 spring upgrade. In 2020, personal lines and financial institutions will be counted as independent entities. The new business segments of maritime, freight, and senior living/long-term care have been included in the 2019 numbers. As a result of the removal of marine insurance from the 2018 spring update, as well as the inclusion of foreign coverage as a distinct line in 2017, and the removal of employee benefits from this year's report, the 2017 spring update statistics have been revised downward. GL, umbrella/excess, auto, and workers' compensation are all covered in this study, however they are listed separately in the table below.

Willis Towers Watson can provide you with further information on how to prepare for a hard market.
List of Chapters

Alternatives to traditional means of risk transmission (ART)

As a viable alternative to conventional insurance, structured and parametric solutions have gained popularity.

2. Owned insurance policies

Traditional property and casualty captive plans remain popular, but new and developing risks are being taken into mind.

Lines of major products

Property, first and foremost.

The decrease of interest rates is continuing, although a general market change is unlikely in the immediate future.

Loss of life

The commercial liability market is beginning to stabilize, which is opening doors for new carriers and competition.

3. The number of international deaths

Most buyers in the international casualty market forecast flat renewals in 2022.

Recall of a product

Be aware of the potential for regulation. Oversight and enforcement operations are expected to increase.

Lines of professional responsibility


Cyber hygiene and controls will be a major issue for any organization that isn't able to establish a strong culture of good cyber hygiene and controls inside it.

Liability of board members and officials

But capacity influx has helped slow the pace of growth in interest rates and other retentions and conditions.

In addition, there is the issue of culpability for employment practices.

Because of COVID-19 and vaccination mandate ambiguity and a lack of fresh competitors, the EPL rate market is still difficult to navigate.

4. Inaccuracies and omissions

Cyber vulnerability is weighing heavily on underwriters' minds, leading to higher E&O rates across the board.

Infidelity/crime is the fifth point.

Employee dishonesty claims continue to be the most common cause of criminal losses, despite new and more sophisticated hacking and deceit methods.

Fiduciary duty

Due to the departure of several carriers, premiums and retentions are expected to climb significantly until at least 2022.

Institutions of higher learning — FINEX

After a period of upward pressure on rates, we foresee continued market stability and slowdown through the year 2020.

Specialty routes

First and foremost, the aerospace industry

The airline sector has experienced a replenishing of the worldwide premium base with the resumption of air travel, and rate rises have moderated somewhat.

Building a new home or building an addition to an Even though interest rates are projected to remain high for the foreseeable future, barring any unexpected events, the worst of the hard market is over.

Upstream and downstream energy markets are being restrained by issues such as these.

2. Climate Change.

3. With dynamic coverage and new product developments, we anticipate the environmental market to adapt to any problems it may face.

5. Liability of healthcare professionals

According to the latest data, healthcare professional liability rate hikes are continuing to slow down.

Kidnapping and ransom are among the special contingency hazards.

All coverage for cyber extortion has been eliminated from most special risks insurance policies.

Professional and product liability in the life sciences

The core and surplus layers of the life sciences product/completed operation/errors and omissions market are both steady.

E&O and D&O managed care

E&O, management liability, and cyber are all tied together and follow the same arduous path.

9. Cargo on the seas

As a result of the revived competitiveness in the market, interest rate rises have slowed down compared to what purchasers experienced from 2018 to 2020.

responsibility for the hull of a marine vessel

While underwriters continue to push for higher premiums on clean business, many policies now include cyber and communicable illness exclusions, a sign of the market's stability.

11% of the total market

A two-tiered market still exists for middle-market insurance consumers, although the number of people in this situation has decreased.

12. Lines of one's own.

Cat-exposed houses had been expecting to see significant rate rises, but the number of insurance customers who have been denied renewal has been extraordinary.

There is a 13. Political risk increases when the repercussions of pandemics hit economic and political systems, especially in developing countries.

Long-term care for the elderly and senior citizens

While there are still numerous issues with coverage, program structure, and capacity, rates are beginning to stabilize, and new capacity is beginning to appear, future competition will be fierce.


Labor shortages and supply chain instability will have a negative effect on both the company's top and bottom lines.

Politics as an instrument of terror and violence

As social upheaval and threats from long-wolf shooters continue to rise, the market continues to draw new participants. Despite these difficulties

In addition, there is a 17-day grace period for It's becoming easier to get trade credit. There are no COVID-19 losses, which means that rates have dropped by an average of 5% to 10% and in some circumstances even more for perfectly clean agreements.


Hopefully, you found the general information presented in this document useful and interesting. Unless explicitly stated otherwise, the material provided here is not meant to serve as legal advice of any kind, and should not be relied upon as such. Do not hesitate to contact us if you have any questions about your insurance. Licensed subsidiary companies of Willis North America Inc., such as Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc., provide insurance products in North America on behalf of Willis Towers Watson.


North American Head of Broking