General liability insurance rates continued to rise for many buyers during midyear renewals with commercial policyholders paying flat to mid-single-digit increases, experts say.
Increased loss frequency, higher court awards and a slightly tighter casualty reinsurance market drove the increases, they say.
Competition among insurers, though, is tempering the rate hikes, they say.
Policyholders are also facing more restrictive general liability coverage as insurers continue to seek to exclude forever chemicals, or perfluoroalkyl and polyfluoroalkyl substances, and exposures related to biometric privacy laws passed by several states.
Rates
The general liability market has been stable for the past several quarters, and average rates during mid-year renewals were flat to up 5%, a trend that will likely continue in the third quarter, said Cliff Allen, New York-based primary casualty practice leader at Aon PLC.
Renewals largely tracked loss trends for individual policyholders, said Debbie Goldstine, Chicago-based executive vice president, U.S. casualty and technical intelligence, and emerging risks practice leader for Lockton Cos. LLC.
“For those that have significant losses or challenging exposure profiles, they will continue to face a lot of underwriting scrutiny and more difficult conditions, but I would say, on the whole, it’s a much more stabilized or predictable environment,” she said.
The range of increases runs from low to high single digits, depending on the account, Ms. Goldstine said.
“It’s definitely positive rate territory for all; we’re not routinely getting reductions,” she said.
Kristen Peed, head of corporate risk at Sequoia Benefits and Insurance Services LLC and vice president of the Risk & Insurance Management Society Inc., renewed her general liability program and several other lines on July 1 for the first time since joining Sequoia last year.
“We started preparing basically on Day 1 when I started,” she said. “Our renewal was very successful.”
Ms. Peed said Sequoia’s general liability rate was effectively flat.
General liability rate increases are still below 5% on average, but they are ticking up, said Peter Locher, head of casualty retail and distribution industry vertical at Willis Towers Watson PLC and head of large and complex casualty broking for Greater Philadelphia.
Losses are increasing in frequency, and reinsurers are pulling back a little from general liability, Mr. Locher said.
If loss costs continue to rise, buyers may see higher increases in the medium term, Mr. Allen said.
Risk managers can improve their chances of a favorable renewal by being transparent with insurers and showing the mitigation strategies they are using, Ms. Peed said.
For example, Sequoia implemented a third-party risk management system this year to review contracts with third parties and track their continuity plans and insurance programs, she said.
“We are fortunate we didn’t have any claims, but you can’t take your eye off the ball; you have to continually be looking for improvement and making sure you’re not missing something,” Ms. Peed said.
Wider exposures
Insurers are concerned about widening exposures, Mr. Locher said.
“You have issues like PFAS, which has been around a long time but is still scary for insurers, and you have issues like biometric privacy — that’s a little bit more recent,” he said.
Ms. Goldstine said insurers are carefully underwriting PFAS exposures, which are important for policyholders to consider when they acquire other companies.
As PFAS and BIPA exclusions proliferate, the exclusionary language can be broad, Mr. Locher said.
“Some of the language we’ve seen in the marketplace has essentially noted that if any aspect of a claim also alleges a PFAS exposure or a BIPA exposure, the carrier then has the right to deny the entire claim,” he said.
Brokers and policyholders, though, often push back against such broad wordings, Mr. Locher said.
PFAs exclusions can be “ring-fenced,” Mr. Allen said. For example, if an organization’s main exposure to PFAS is from fire-fighting foams, exclusions can be tailored to that specific exposure, he said.
In addition to PFAS and biometric exposures, insurers are excluding bodily injury and property damage-related cyber exposures, Mr. Allen said.
“There is an (Insurance Services Office) version of the exclusion that does give a carve back for resulting bodily injury and property damage from a cyber incident, but it can be a challenge to negotiate that version in,” he said.
Packaged coverages
“On the flip side, though, there’s a lot of capacity out there in the primary casualty space,” Mr. Allen said.
Buyers can negotiate more favorable rates on more difficult lines if they are packaged with more profitable lines like workers compensation, brokers say.
“The multiline offering creates a more strategic buy for the client and a more attractive portfolio move for the carrier,” Ms. Goldstine said.
Insurers are also more likely to offer capacity to policyholders that allow them to write primary coverages, including general liability, auto liability and workers comp, in conjunction with the lead umbrella layer, Mr. Locher said.
