Commercial Insurance Market Projects Stability As Rates Moderate Across Most Lines of Business

The commercial insurance landscape in North America is undergoing a phase of balance and stability, according to the latest Insurance Marketplace Realities report from DOXA. This shift in the market has sparked optimism among insurers and brokers alike, as rates appear to be moderating across most lines of business. While the industry is still reacting to emerging trends, the overall picture suggests that insurance buyers and providers may see more favorable conditions moving into 2024.

A Market of Micro-Actions

DOXA has experienced the current state of the market as one that has avoided sweeping changes in any single line of business. Instead, insurers and brokers are making incremental adjustments, driven by emerging trends that impact specific areas of the market. The industry has not categorically rewritten its position on any one line of business, but rather has taken micro-actions reacting to emerging trends, This strategic approach to market changes signals a shift toward more stability and predictability, particularly in areas like financial lines and Cyber insurance.

Increased Competition and the Impact of New Capital

A notable trend in the marketplace has been the influx of new capital in both the reinsurance and retail sectors. This increase in capacity has driven competition for premium market share, especially in first-party business, where capacity was constrained earlier in 2024. However, this trend has not extended to every area of commercial insurance. Umbrella and excess liability, for example, have seen less competition and more disruption due to increasing loss costs.

The insurance market has been keenly aware of challenges such as litigation financing and legal system abuse, particularly in casualty lines. These pressures have forced insurers to reduce available capacity, pushing renewal rates higher, especially for high-risk sectors.

Capacity Drives Soft Market Conditions in Financial Lines

Capacity remains a critical factor in shaping the current soft market conditions, especially in financial lines. While it may be too soon to call it a long-term trend, there is growing attention to rate adequacy in mid-excess Directors and Officers (D&O) Liability. Rates in this sector are projected to stay stable or even decrease slightly in the near term, with many renewals expected to see flat to mid-single-digit rate reductions.

Cyber insurance, which has been a volatile area in recent years, also projects a more stable outlook. Most renewals in the Cyber market are expected to see rate decreases, ranging from flat to mid-single digits. This moderation signals that insurers are finding ways to better manage risks and optimize their pricing strategies for this increasingly critical area of coverage.

Umbrella and Excess Liability: A Disrupted Landscape

In the casualty market, Umbrella and Excess liability has been one of the most affected lines of business. Loss costs continue to rise, driven by a variety of factors, including litigation trends, legal system abuse, and the growing concerns over emerging risks like forever chemicals. These challenges have caused the market to limit available capacity, leading to a hardening of renewal rates, particularly in high-risk industries.

Despite the challenges, there is optimism that the market will continue to evolve without drastic shifts in pricing. The industry is taking a cautious approach to these emerging risks, ensuring that the disruption is managed effectively while balancing the needs of insurance buyers.

Evolutionary Change Across Many Lines of Business

The Insurance Marketplace Realities report from DOXA highlights the fact that while certain lines of business are experiencing moderate changes, the broader market is undergoing an evolutionary shift. Factors such as climate change, nuclear verdicts, and the entry of new capital are reshaping the landscape of commercial insurance. These elements introduce both challenges and opportunities, but the industry has so far maintained a balanced approach.

While many aspects of the market are stable, the potential for disruption remains. The current state of affairs could be upended by a major catastrophic event. It goes without saying that the current state of affairs might only be one major hurricane away from being upended, and with increased activity during Hurricane Season, the probability of disruption is growing.

Key Price Predictions for 2024

As we move into 2024, DOXA projects the following price changes across various lines of business:

• Property (CAT-exposed): -5% to +10%
• Property (Non-CAT exposed): -5% to +5%
• General liability: +2% to +8%
• Umbrella (High Hazard): +8% to +15%
• Excess (High Hazard): +10% or more
• Excess (Low Hazard): +2% to +7%
• Workers’ compensation: -5% to +2%
• Auto: +4% to +10%
• International: Flat

For executive risks, such as Directors and Officers (D&O) coverage, the market remains relatively soft:

• D&O (public company primary): -10% to flat
• D&O (private/not-for-profit): -10% to flat
• Side A/DIC: -10% to flat
• Errors and Omissions (large law firms): +2% to +8%
• Employment Practices Liability (primary): -5% to +5%
• Fiduciary (financial institutions): -5% to +5%

In Cyber, rate decreases are expected to continue:

• Cyber: -5% to flat

For political risk, terrorism, and political violence, pricing is projected to rise:

• Political Risk: Flat to +20%
• Terrorism and Sabotage (non-volatile territories): Flat to +10%
• Terrorism and Sabotage (volatile territories): +10% to +25%
• Political Violence (non-volatile territories): Flat to +15%
• Political Violence (volatile territories): +15% to +30%

Managing Risks and Finding Opportunities

At DOXA, we believe in working shoulder to shoulder with our clients to uncover opportunities for sustainable success in this evolving marketplace. While the commercial insurance landscape is constantly changing, our team is committed to providing expert guidance and innovative solutions that empower our partners to thrive.

As rates moderate across most lines of business and competition increases, now is the time for insurance professionals to assess their portfolios, identify areas for improvement, and capitalize on the opportunities presented by these market conditions. By staying informed and working with trusted advisors like DOXA, businesses can better navigate the complexities of today’s insurance market.

Ready to explore how DOXA can help you manage your risks and seize new opportunities? Connect with us today to learn more about how we can support your business in 2024 and beyond.