A bit of good news about the hard market for commercial Property and Casualty Insurance: If you need layers of coverage to meet your organization’s needs, coverage generally is available – and so is the expertise to help you put the coverage in place.
But here’s the catch: There really are no “ifs” about it. Under current market conditions, you’re going to need layers of coverage, and making sure that coverage is sufficient and cost-effective will require the work of an experienced agent or broker.
These are the realities of business insurance in 2021.
Let’s say your business is contractually obligated to carry $10 million in Liability Insurance, a requirement you previously were able to meet with a commercial Umbrella policy supplementing your General Liability coverage. In the past, your Umbrella satisfied that limit. But under current conditions, the best you can do from a standard carrier is a $1 million Umbrella – and you’re still contractually obligated for $10 million in coverage.
Thanks to the existence of the Excess Insurance market, you probably still can get the coverage you need. But it’s going to take a lot of effort. Instead of one or two carriers, you now may have to work with three or four to provide the layers that get you to that $10 million limit.
Finding those carriers and working with them on your insurance program is where an experienced agent or broker with extensive resources comes into play.
The Outlook Entering 2021
Here’s the outlook on the market for Umbrella and Excess Insurance as outlined in Alera Group’s Property & Casualty 2021 Market Outlook whitepaper, released in December 2020:
► Industry-wide, increases are expected to be anywhere between 10% and 150%, depending upon underwriters’ perception of the risk’s hazards and the limits purchased.
► Per-risk capacity is being significantly reduced, as many carriers are unwilling to assume more than $10 million layers while also requiring much higher attachment points or increases in underlying limits.
► Expected to be hit hardest on pricing increases, capacity limitations and underlying insurance requirements are larger-limits policies in excess of $15 million, as well as insureds with poor loss experience.
► Increased claims costs are being driven by the impact of social inflation, litigation funding, increases in the number of class action lawsuits and the unknown impact of COVID-19 on liability coverages.
► Infectious/communicable disease exclusions will be added to many new and renewal contracts.
To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, including a detailed look at individual lines of coverage for the hospitality and gaming industries, click the link below.
Quarter 1 Update
Approaching the end of the first quarter in 2021, the P&C market and its underlying conditions were largely unchanged, though in some respects they were worse.
- Nuclear verdicts in liability lawsuits continued to escalate.
- Weather-related disasters, such as the February winter storm that paralyzed most of Texas, continued to produce costly claims.
- Cyber crime and cyber liability were growing concerns, with ransomware attacks a particular problem.
- And while recent news regarding the COVID-19 pandemic and the U.S. economy was encouraging, plenty of uncertainty remained.
As a result, the outlook conditions among standard P&C carriers continued to harden the Umbrella and Excess markets, with rates and underwriter selectivity continuing to increase while availability and capacity continued to decline.
What You Can Do
Here are four steps you can take:
- Start the application process early. Calling your agent on a Friday afternoon and saying “I need a $30 million limit in place by 5 p.m.” was never a good idea, and there’s no way that’s going to work now. Layers of coverage will be necessary, and determining what limits are available and which excess carriers will provide them takes time.
- Work with an agent or broker who has the ability to reach across multiple carriers due to extensive resources and well-established relationships. An insurance professional who not only knows your business and industry but who also can pick up the phone and quickly speak with multiple Excess insurers to put a package of policies together is invaluable. An agent or broker with an Alera Group firm has the additional advantage of being able to collaborate with partners around the country to arrive at a custom-designed solution.
- Consider alternative insuring methods. As we advised in the Market Outlook whitepaper: “Be ready to face challenges in securing certain coverages and excess limits. Your current program structure may not be available at renewal and your incumbent carrier may no longer be willing to provide competitive coverage.” Captive insurance, once the realm of only large companies with the capital necessary to self-fund, may be not only a viable but a desirable alternative to mid-size companies open to creating or joining an existing group.
- Find additional ways to contain costs. Healthcare is a concern of most businesses. Alera Group’s Employee Benefits division does a superior job of providing clients with solutions that meet the needs of both employer and employee. To learn about some of those solutions, check out our March 18 webinar, “How Advanced Strategies Address the Rising Cost of Healthcare.”
About the Author
Avon-Dixon Insurance, an Alera Group Company
Richard Trippe has 35 years of experience in the Property and Casualty Insurance industry, beginning as an underwriter and later serving as an account executive and agency branch manager. He became Managing Partner of Avon-Dixon Insurance, an Alera Group Company, when the firm joined Alera Group at the outset of 2019, having served as Avon-Dixon’s President and CEO since 2011.
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