Current Property & Casualty Insurance Market Conditions

By Stacy Eickhoff, Sr. Vice President, Risk Strategies

Insurance market conditions have improved slightly, with the rate of premium increases slowing in Q4 2023.

The following are the top three key takeaways from The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Report for Q4 2023 (October 1 – December 31):

● “Premiums increased by an average of 7.0% across all account sizes in Q4 2023, down from the previous quarter, but still marking the 25th consecutive quarter of premium increases. Small and large account premiums increased by an average of 6.7% and 6.1%, respectively, while medium-sized accounts had the highest increase for the 3rd consecutive quarter, at 8.2%.

● Similar signs of moderation were also evident across all lines of business. Premiums increased by an average of 5.7% across all lines, down from 7.1% in Q3.

● Commercial property premiums premium increases slowed noticeably, from 17.1% last quarter to 11.8% this quarter—though this was still the highest increase in premiums among all lines. As with the previous quarter, justifications from carriers included trouble with reinsurance capacity and pricing, increased natural disaster claim frequency and severity due to climate change, and inflation. Capacity for the line continued to fall, and underwriters prioritized requests for information on valuations and exposures like wind and hail.”

Property insurance market conditions continue to be impacted by catastrophic wildfires and other weather-related natural disasters. Those businesses in CAT prone areas and/or with losses can expect changes in terms including reduction in coverage, higher deductibles, and limited capacity. Further impacting the market are the increased cost of goods due to inflation and labor shortages.

(Council of Insurance Agents & Brokers, 2024)

The CIAB survey also found that ”Sixty four percent (64%) of respondents reported a decrease in capacity for the line.” the ninth consecutive quarter of capacity reductions. Besides showing caution for deploying capacity, underwriters sought updated property valuations and extensive information on property exposures, including roof age or wind exposure. Overall, carriers continue to evaluate their books of business with a jaundiced eye. (Council of Insurance Agents & Brokers, 2024)

Whether you own your building or just rent, it is critical that you document any updates to roofing, electrical, plumbing, and HVAC systems. Several admitted insurance carriers will not offer property insurance to those insureds located in frame or joisted masonry buildings older than 30 years old without proof or confirmation of updates to these systems.

The floor covering industry faces challenges due to several factors. The cost of potential losses due to fire is high as the materials used to manufacture carpet burn hot when ignited, stored adhesives, and the use of forklifts fueled by propane tanks make any fire much more difficult to extinguish. Water damage and smoke damage to floor covering materials is difficult to mitigate; even if the fire is extinguished timely, the likelihood of a total loss is high.

The General Liability market is less impacted by market conditions, with carriers seeking small rate increases for those businesses with favorable loss history, good controls, and proper risk transfer when using sub-contractors. Most floor covering dealers have a combined exposure of retail/wholesale and contracting. Insurance carriers have difficulty marrying the two. Having a broker that understands the exposures of your industry is critical.

Automobile insurance rates will continue to be challenging through 2024. This line of business continues to be a loss leader for insurance companies that write this coverage.

In a recent Insurance Journal article, Jason B. Kurtz, a principal and consulting actuary for global consulting and actuarial firm Milliman, is quoted “Looking at commercial auto, underwriting losses continue, with a projected 2023 net combined ratio of 110.2, the highest since 2017,” said Kurtz. “For 2023 Q3, the incurred loss ratio was the highest in over 15 years, while the 2023 net written premium growth rate of 6% is noticeably lower than the prior two years. For commercial multiperil, the 2023 net combined ratio of 110.3 is forecast to be the highest since 2011.” (Report: 2023 Combined Ratio Forecast at 103.9, 2024 February 19)

Carriers are raising prices, exiting underperforming states, and applying strict underwriting protocols. Businesses with driving exposure should at minimum have a safe driving policy which includes both driver acceptability guidelines and a mobile device/distracted driving policy. Accounts with losses will have difficulty finding coverage.

Workers’ Compensation continues to be one of the most favorable lines of coverage where pricing is concerned. The National Council on Compensation Insurance (NCCI) most recent update to their Frequency and Severity by State report includes the following results:

”On an individual jurisdiction basis, five consecutive years of underwriting gains have been observed in the majority of jurisdictions (27 of 38). While there is more year-to-year volatility in some jurisdiction-specific combined ratios, results on a combined countrywide basis have been stable.” (National Council on Compensation Insurance, 2024)

The excess liability and umbrella market continue to remain hard, and pricing is driven based on the underlying exposures with automobile being the main driver. Carriers are still heavily scrutinizing accounts, and capacity is still limited. Social inflation and its impact on exponentially rising claims costs, driven by factors such as litigation funding, nuclear verdicts and surging medical care expenses continue to drive the market. Where umbrella coverage can be purchased in conjunction with other lines of coverage, pricing is much more favorable.

Navigating the insurance market is one more challenge a business must face in today’s world. To achieve the most optimal results for your business, it is critical to keep your location maintained, enforce your safety policies and procedures, and use your resources like the World Floor Covering Association, your insurance company’s risk management tools, and an insurance broker that knows your industry. If you need assistance give Risk Strategies a call, we know your industry. ■