Hopes for market stability “all but disappeared”: Woodruff Sawyer

A new report from independent US brokerage WoodRuff Sawyer claims that hope for stability in the insurance and reinsurance market next year is “virtually gone” in the wake of Hurricane Ian and the many economic challenges facing the industry.

A stable house of cardsWoodRuff Sawyer’s 2023 Property & Casualty Guide Looking Ahead notes that factors such as the current period of inflation, the war in Ukraine, and ongoing supply chain issues have offset any previous trends of stability with greater economic uncertainty.

As a result of these factors, property premiums are rising again and casualty lines are increasing, albeit at a slower rate.

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In addition, inflation, supply chain constraints, secondary losses at risk, and a challenging reinsurance market are contributing to the rise of the commercial property insurance market in 2023, analysts warned.

“Prior to Hurricane Ian, there was hope that commercial property rates would stabilize, and, in some cases, that insurers would receive rate reductions,” they wrote. “After John, that hope is almost gone.”

Stratumn, by SIA Partners

Over the past three years, many property carriers have adjusted their portfolios, reduced line sizes, changed terms and conditions, and attempted to achieve technical rate adequacy, which was believed to add more stability to the accounts.

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But with so many challenges facing reinsurers/insurers now, WoodRuff Sawyer expects a significant focus on risk retention and ceding in 2023, and other options such as parametric insurance need to be explored.

The broker expects that carriers will continue to monitor adequate values, and that there will be a higher focus on revenue and business continuity. Risk management will also be critical, he said, and insurers and brokers will need to strategically decide how best to allocate capital internally or externally.

In terms of rate change projections for property lines in 2023, WoodRuff Sawyer predicts increases of 0-5% for non-cat business and 5-10% for cat business, provided this business has a favorable loss history.

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For businesses with an unfavorable loss history, the business project rate increases by 15% for non-cat business and 30%+ for heavy cat business.

The report also notes that the outlook for casualty lines in 2023 remains difficult as well, as social inflation including increased litigation, third-party investment in lawsuits, and increased liability verdicts and settlements continues to exert pressure on insurer competition and raising rates.

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