Commercial property and casualty prices continued to rise in the fourth quarter of 2022 with an average increase of 8% across all accounts sizes, down slightly from 8.1% in the third quarter, according to the latest survey data from the Council of Insurance Agents & Brokers (CIAB).
Large businesses saw higher price increases on average (9.1%) than medium (8.3%) or small (6.5%), CIAB reported. The fourth quarter of 2022 marked the 21st consecutive quarter of average price increases.
Some lines showed continued moderation. Brokers saw signs of relief on cyber and umbrella pricing in the fourth quarter. Umbrella price increases fell out of the double-digit range to 9.6% for the first time in 12 quarters. Workers’ compensation prices also continued to soften, with an average decrease of 1.1%.
However, commercial property overtook cyber as the “most troubled” line for the first time in seven quarters, CIAB found, with an average premium increase of 16% in the fourth quarter.
Brokers placing property risks faced tougher underwriting and a tighter market—89% of respondents saw less available capacity last quarter. Property valuations took center stage as underwriters demanded updated estimates for replacement costs.
“Insurance to value (ITV) was the key discussion item on property,” said one respondent from the Northeast, citing the impact of inflation and the cost of materials on property premiums. The impact of Hurricanes Ian and Nicole and severe convective storms in the Midwest had insurers looking to reduce their exposure.
“Underwriters required higher deductibles, higher pricing, and more restrictive terms on property risks, using much more ‘layering’ on property risks of any size,” said a broker from a Southeast firm.
Survey respondents attributed the tough property market to natural catastrophe losses from Hurricanes Ian and Nicole and severe convective storms in the Midwest. Commercial property claims also spiked in the fourth quarter, up from 56% of respondents seeing claims in the third quarter to 71% in the fourth quarter. Flood claims and business interruption claims also rose, up from 31% to 44% and 15% to 26%, respectively.
Cyber insurance pricing slowed significantly to an average 15% increase compared to 20% in the third quarter of 2022, 26.8% in the second quarter and well below the line’s peak at 34.3% in the fourth quarter of 2021.
“One possible factor behind the recent smaller increases is reduced cyber claims activity,” CIAB noted. “According to survey results, the number of respondents reporting an increase in cyber claims has fallen almost 20% from the previous quarter, and nearly 30% from the beginning of the year.” The organization added, “It could be that after several quarters of sharp increases, premiums may have reached or may be about to reach a more appropriate level for the potential losses, which can be sizable.”
That said, underwriters have maintained their strict requirements for cyber buyers, resulting in brokers reporting increases in the number of questions about cyber hygiene.
“The detail required in the applications has become very cumbersome for clients to complete,” said one Northeast broker, while another said insurers “held to requirements of insureds deploying multifactor authentication, implementing patching strategies, etc.”
For more timely news on commercial insurance pricing, contact CMR Risk & Insurance Services, Inc. today.
Source – Zywave, Inc.