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1、Insurance Marketplace Realities20232/2023 Insurance Marketplace Realities1/Introduction 4Executive summary 42/Major product lines 7Property 8Domestic casualty 11International casualty 13Middle market 143/Professional liability lines 16Cyber risk 17Directors and officers liability 19Employment practi

2、ces liability 21Errors and omissions 23Fidelity/crime 25Fiduciary liability 26Financial Institutions FINEX 314/Speciality lines and solutions 33Aerospace 34Alternative risk transfer(ART)37Architects and engineers 40Captive insurance 42Construction 44Energy 51Environmental 54Healthcare professional l

3、iability 55Special contingency risks:Kidnap and ransom 56Life sciences 57Managed care E&O and D&O 59Marine cargo 61Marine hull and liability 63Personal lines 64Political risk 65Product recall 67Senior living and long-term care 68Surety 70Terrorism and political violence 72Trade credit 73TABLE OF CON

4、TENTS 2023 Insurance Marketplace Realities/34/2023 Insurance Marketplace Realities4/2023 Insurance Marketplace RealitiesSince 2019,commercial insurance buyers in North America have been searching for a break in the clouds.The second half of 2022 has ushered in a new environment that provides a brigh

5、ter picture,one with improved pricing conditions,coverage,and capacity for many commercial lines of business.This is not to suggest it is time to celebrate soft conditions,but it does mark demonstrable improvement in the market.That said,one of the lone holdouts for a hard market,commercial property

6、,is facing material headwinds,and the industry as a whole must mind the upward pressure that several macro factors may have on rate.The first of these factors is inflation in its many forms.The Consumer Price Index and slipping purchasing power may headline the news,but theres also wage inflation,me

7、dical inflation,and,as anyone in the casualty world will tell you,social inflation.These factors are raising loss costs.On the property side,every buyer is challenged to accurately assess and present replacement cost values that go up as the cost of labor and materials goes up.Carriers,meanwhile,mus

8、t recalibrate portfolios based on their growing potential exposure.Executive summaryOn the casualty side,nuclear verdicts fueled by social inflation continue to push tort costs and,subsequently,claims costs higher.But insurers have been dealing with these forces for some time now,and pricing adequac

9、y is beginning to turn the market for buyersrate reductions are possible and even approaching double digits in the best scenarios.Property insurers have rekindled their tenacity to drive rate.This retrenchment is not solely driven by inflation but also by the continuing procession of loss events pus

10、hed by the extremes of weather.This brings us to the second macro factor we are focused on:Hurricane Ian.In addition to the personal tragedies that resulted from the punishing landfall,this was a big,albeit unique,loss event.While ultimate economic costs will take some time to play out,there is no d

11、oubt that Ian losses lean heavier on the personal lines side than the commercial side.However,the commercial response has been swift and dramatic.With retail insurers making immediate adjustments to catastrophe capacity and rate,reinsurers are telegraphing grim renewal conditions for 2023,which woul

12、d compound the rate and structural pressures we experience today.Whatever the fallout from the 2022 hurricane season,natural catastrophes loom large for our industry.Wildfire,not high on our lists a ten years ago,remains on our lists now.Extreme weather of all kinds strikes in places where we havent

13、 seen it before,and places weve seen it all too often.2023 Insurance Marketplace Realities/5Rate forecast:-3%to+5%General liability Liberal class action certification and a highly-organized plaintiffs bar Desensitized jury pools and uncertainty around litigation in post-pandemic world Those with exp

14、osures materially impacted by inflation may find more flexible rate outcomesRate forecast:+5%to+10%Automobile liability 2021 AL segment combined ratio is estimated at 101.3 NHTSA puts the fatality rate for 2021 at 42,915 up 10.5%from 38,829 in 2020 Large auto verdicts:300%increase over seven years i

15、n trucking claims Distracted drivingRate forecast:-5%to+2%Workers compensation Profitable combined ratio for eight years straight Opioid addiction Aging workforce Medical wage inflation Medical technology advancements increasing treatment costs and reducing mortalityRate forecast:High hazard/challen

16、ged class:+15%Low/moderate hazard:+7.5%Umbrella liability After the peak in 2020/21,pricing adequacy has attracted greater global capacity Risk-specific(two-tiered)underwriting remains,with high hazard risks or lower attachment points yielding worse outcomes Uptick in frequency of punitive awardsRat

17、e forecast:High hazard/challenged class:+5%Low/moderate hazard:-5%to+5%Excess liability Even with improving capacity,the industry still faces the impact of nuclear verdicts,catastrophic liability losses and the expansion of litigation funding A return at looking at pricing rate relativity between la

18、yers has emergedRate forecast:Flat to+25%Cyber An increased level of competition from cyber underwriters eager to write new business following the recalibration of cyber rates last year,has led to more nominal rate increases when organizations can demonstrate good cyber security controls year over y

19、earHere are some highlights from our 2023 predictions:So,while the grip of the hard market is loosening,buyers are not yet free from it.There are opportunities in the marketplace,which puts an increasing emphasis on the importance of analyzing and understanding your risks and being prepared to prese

20、nt them clearly and effectively to underwriters.Use all the tools available to you,especially the analytic tools that steadily improve in their predictive value and ease of use.Work closely with your risk management partners carriers and brokers to make the most of the opportunities that do present

21、themselves.Availing yourself of these resources will help make you and your organization all the more ready to face the ongoing challenges that lie ahead.Jon DrummondSenior Editor,Insurance Marketplace RealitiesHead of Broking,North America+1 312 288 7892 For more insight on how you can prepare for

22、a challenging marketplace,contact your local WTW representative.6/2023 Insurance Marketplace RealitiesRate forecast:Public company Primary:-7.5%to+2.5%Public company Excess:-15%to flat Private,not for profit Overall:-10%to+7.5%D&O Increased capacity from newer market entrants and an improved securit

23、ies litigation environment continues to drive more competitive market dynamics Broader market conditions have improved since the peak of the hard market in Q3 2020 Moderation has been significant and is expected to continue into 2023Rate forecast:Terrorism and sabotage:+10%to+40%Political violence:+

24、20%to+45%Terrorism and political violence Current political/economic conditions and conflicts around the globe are helping drive up pricing for political violence and terrorism insurance The crisis in Ukraine has added another dynamic to a marketplace already in turmoil from the lingering effects of

25、 the pandemic and global economic instability Captive insurance vehicles continue to provide access to otherwise unavailable or uncompetitive capacity for terrorism riskRate forecast:FlatSurety Stable loss ratios in 2022 96%of surety executives indicating that there are no plans to tighten underwrit

26、ing in the near future Excellent surety capacity with multiple new surety entrants Infrastructure spend outweighing dampening residential market decline due to rising interest ratesRate forecast:Cat-exposed:+15%to+25%Cat-free:+10%to+15%Property Premium increases for most insureds will be driven by i

27、nflationary construction costs,heightened reinsurance pressures and possible catastrophe capacity constriction,while valuation of assets will be the key topic of conversation in 2023Major product lines 2023 Insurance Marketplace Realities/78/2023 Insurance Marketplace RealitiesThe direct property ma

28、rket continues to show rate lift,though the severity varies by industry segment.Rate increases will continue to develop into 2023 for most insureds.The market remains bifurcated,as underwriters continue to use a discriminating approach to risk selection and pricing.Challenged occupancies,such as for

29、est products,metals and minerals,frame habitational,and food and beverage,as well as loss-driven accounts and risks with a heavy catastrophe footprint will continue to see rate increases in the double-digit range.Accounts that have performed well from a loss perspective combined with a solid risk ma

30、nagement commitment have reached a level of rate adequacy.Additionally,accounts that have monetized retentions to rid attritional loss frequency will find themselves in a more advantageous position.The biggest hurdle for shared and layered accounts are the buffer or excess layers,where changes in th

31、e insurable values have now impacted attachment points,capacity and cost.Larger excess layers are becoming more compressed to ensure completion,thus driving more premium into the lower layers.An increase in the number of insurers to complete these excess layers will only serve to keep rate increases

32、 afloat.Contradictorily,the primary layers on high quality accounts have become more and more competitive,and there is more capacity needed to complete many of the primaries on property programs.CAT capacity may become more commoditized as deployment will be constricted and highly controlled.Given t

33、he frequency of severe convective storms(SCS)that continue to plague the southern U.S.,along with wildfire in the west,carriers will continue to scrutinize these exposures,with greater pressure to implement tornado/SCS/hail and wildfire percentage deductibles though they are yet to be mandated acros

34、s the board.Valuation of assets continues to be the marquee issue for property insurance buyers.There is no doubt that the property landscape remains awash in a world of unprecedented climate change-related natural disasters that have become more frequent and severe.As the pandemic tries to wind its

35、elf down,we are still faced with a historic global supply chain problem and high inflation that shows little sign of abating.These factors have direct impact on how the insurers view the current property risk landscape and are driving carriers to take a hard look at replacement costs.Replacement cos

36、t values are the basis of modeling on which property coverage decisions are made.Modeling outputs help risk professionals calculate limits,probable/maximum foreseeable losses,deductibles,business continuity planning,claim adjustment/payment and,ultimately,pricing.Given the economic forces at work,bu

37、yers may find themselves underfunded for retained risk by not properly purchasing adequate cat cover or by improperly setting sublimits for key coverage elements.Insurers are fully focused on ensuring that valuations are correct,as they in turn need to demonstrate to their reinsurers that their port

38、folio data is robust.For those buyers perceived by the market as presenting inaccurate or out-of-date values,insurers are pushing intently for the inclusion of potentially claim limiting language,such an occurrence limit of liability clause or a margin clause.These clauses are becoming commonplace a

39、s insurers address the risk of under valuation.Complicating matters for buyers,the language in these clauses varies across the industry,leading to the potential for misunderstandings and conflicting interpretations.PropertyRate predictionsCat-exposed+15%to+25%Cat-free+10%to+15%Key takeaway:Premium i

40、ncreases for most insureds will be driven by inflationary construction costs,heightened reinsurance pressures and possible catastrophe capacity constriction,while valuation of assets will be the key topic of conversation in 2023.2023 Insurance Marketplace Realities/9 As a result,settling claims can

41、become cumbersome.Buyers may wish,or in many cases,be compelled to get an independent appraisal.Such appraisals should go a long way toward providing carriers with more confidence regarding value accuracy and a greater comfort level in assessing risk and possibly removing the clauses mentioned above

42、.COVID-19 claims continue to be litigated,and a final outcome is still years out for many.Insurers appear well reserved for these potential claims.Any further pricing impact on property policies from COVID-related issues appears to be in the rear-view mirror.However,communicable disease exclusions h

43、ave become standard,alongside cyber exclusions.Contingent business interruption(CBI)exposures continue to concern underwriters due to continuing supply chain/logistics constraints,lack of exposure information and unexpected losses.As a result,sublimit reductions are being imposed as well as requirem

44、ents to fully name key customers and suppliers.Better data relating to contingent exposures leads to better outcomes in retaining customary sublimits.Underwriters will look for insurance buyers to provide copies of any disaster recovery or business continuity plans for review to understand makeup ca

45、pability relative to CBI exposure.Underwriters continue to push for the implementation of company/carrier policy forms in lieu of manuscript policies.Carrier forms typically appear to be more standard in the single carrier universe but on large shared and layered accounts,the manuscript remains the

46、most common approach.In some cases,carriers will assert that a broader capacity offering can be garnered with a company/carrier form,but cracks in the armor are appearing.2022 hurricane season update Hurricane Ian was the second major hurricane of the 2022 Atlantic hurricane season,but the first to

47、make U.S.landfall.Landfall in Cayo Costa,FL as a Cat-4 hurricane with sustained winds of 150mph Landfall in Georgetown,SC as a Cat-1 hurricane Track shifted south and east,away from Tampa10/2023 Insurance Marketplace Realities10/2023 Insurance Marketplace Realities Likewise,secondary perils and attr

48、itional cat have caused headaches for reinsurers and impacted profitability and earnings in recent years.The retrocessional market has seen significant rate increases primarily due to a lack of capacity as demand clearly outweighs supply adding further pressure on the re/insurance marketplace.Major

49、retrocession capital retreat has been occurring over the past quarter,which is expected to disrupt January 1 treaty renewals.Many major reinsurers are signaling a hold on additional aggregate deployment in their 2023 plans.Given inflationary concerns and the current rating environment,there will be

50、natural growth to their existing portfolio.This will exacerbate the flight to quality within the greater marketplace.Significant flight to quality meaning that insurers are using the hardening market to housekeep existing portfolios prior to focusing on new business.The flight to quality is also bei

51、ng seen in the MGA space,as(re)insurers are trimming delegated authority exposure.This is especially being felt in the regional MGA space.The general sentiment of all this was discussed at the Monte Carlo Rendezvous which occurred in mid-September,and Baden-Baden which occurred in late October.As a

52、result,insurance buyers with loss-affected cat exposure should expect double-digit rate increases,though outcomes still vary by territory,occupancy,claim history and strength of trading relationship.Increased submission flow into the market means underwriters have more ability to be selective on dea

53、ls.Hence,we are seeing a flight to quality,where carriers are using the hardening market to housekeep existing portfolios prior to focusing on new business.If values are perceived as being inadequate,pricing will be more punitive.Terms and conditions are being reviewed with scrutiny.Non-cat business

54、 that is loss-free can expect low to mid-single digit rate increases,driven by market competition.Given the wide range of damage it is too early to make accurate determinations on possible loss estimates.Building inflation and lack of qualified contractors may push the damages higher as the ability

55、to re-construct will have a long timeline.Ian is not expected to be a market changing event but will certainly generate conversation.ReinsuranceInflation and increases in exposures are driving increases in reinsurance rates.The reinsurance marketplace direction is clear:rate firming,withdrawal of ca

56、pacity from catastrophe lines and many insurers having to take on more net positions than in previous years.Recent results have produced these estimates:Property fac:+5%to+15%depending on historical and recent loss activity.Little to no new capacity but markets remain generally stable as respects ag

57、gregate deployment.Property cat(occurrence):+5%to+20%(loss free),+20%to+40%(loss impacted);capacity exiting the market;reinsurers unwilling to do deals at market terms and overall lack of capacity to fill programs“at any price.”Property cat(agg):+10%to+20%(loss free),+20%to+40%or more(loss impacted)

58、.Expiring capacity will continue to be tough to renew.Best-in-class clients are seeing aggregate limits shrink.Property risk:+5%to+10%(loss free),+10 to+25%(loss impacted).The most stable piece of the market but continuing to harden,with reinsurers pushing on terms and conditions(lowering occurrence

59、 limits,removal of cat coverage,etc.).Worldwide dedicated reinsurance capital declined about$40 billion in the past year($475 billion in 2021 to$435 billion in 2022)as modeled loss costs increased by some 20%.The reinsurance market has created its own inflection point similar to what we saw around 2

60、017.We expect higher treaty costs to be passed from insurers to their insureds as investors continue to push for profitability.The industry-wide consensus is that this prolonged hardening of the market will continue for the next 12 to 18 months before leveling off.Reinsurers will continue to steer a

61、way from cat volatility toward more risk-focused business that is diversified and stable.Contact Scott C.Pizzi Head of Property Broking,North America+1 908 517 6876 2023 Insurance Marketplace Realities/11Domestic casualtyEvents outside of buyer control continue to drive casualty rate increases.Infla

62、tion Social inflation Medical inflation Wage inflation Consumer Price Index inflation(driving revenues,but arguably not exposure)Third-party litigation funding Continued nuclear verdicts,especially with large punitive damage componentsKey takeaway:Workers compensation continues to provide underwriti

63、ng profit,maintaining a steady primary casualty marketplace.Increased capacity and pricing adequacy have started a shift in pricing competition for umbrella and excess liability;however,high hazard risks are still seeing modest increases and coverage restrictions.Lower hazard risks attract excess ca

64、pacity from incumbents and new markets causing rate reductions.PFAS/PFOA and other forever chemicals are driving underwriting concerns and therefore additional questions and potential limitations of coverage across a wide array of businesses.Factors leading to the deceleration of rate increases have

65、 become more prevalent and have drastically moderated rate over the course of 2022.Workers compensation continuing as most profitable line of business for carriers.Return of excess capacity with approximately$300 million additional limit available versus 2020.Pricing adequacy of smaller lines within

66、 excess liability.Auto liability continues to be a driving force behind the unprofitability of casualty insurers.While“forced”program restructuring has curtailed since drastic changes started in 2020,insureds continue to re-evaluate due to the reluctance of excess pricing and capacity.Continued rate

67、 increases have yet to match the pace of trend/inflation increases needed to stabilize pricing.The National Safety Council(NSC)estimate of total motor-vehicle deaths for the first six months of 2022 is 21,340,down 1%from 21,530 in 2021 but up 15%from 18,533 in 2020.Mileage in the first six months of

68、 2022 increased 2.8%from 2021 and was up 15.9%from 2020,showing the full rebound from COVID-19.The estimated mileage death rate in the first half of 2022 is 1.34 deaths per 100 million vehicle miles traveled,down 3.6%from 1.39 in 2021 and down 0.7%from 1.35 in 2020.However,the mileage death rate is

69、still up 16.5%from pre-COVID normal in 2019(1.15).In 2020 a total of 4,965 people died in large-truck crashes,up 31%since 2011(71%of which were non-truck occupants).Social inflation Casualty Actuarial Society reports the effect of social inflation on commercial auto liability losses alone contribute

70、d$20 billion of losses between 2008 and 2019.Of this,$4 billion was an unexpected loss,and therefore not contemplated in loss development factors.The increased frequency of oversized auto liability losses has resulted in lead umbrella markets continuing to increase attachment points on larger fleets

71、.While some were driven to take increased retentions or stretch the limits with higher retention in the primary and buffer layers of auto liability,others moved to fully fronted auto programs to maintain higher excess limits for balance sheet protection.Rate predictionsGeneral liabilityFlat to+10%Au

72、to liability+3%to+10%Workers compensation-5%to flatUmbrella High hazardFlat to+10%Umbrella Low/moderate hazard-2%to+5%Excess liability High hazard Flat to+10%Excess liability Low/moderate hazard-10%to+5%12/2023 Insurance Marketplace Realities12/2023 Insurance Marketplace Realities With reinsurance r

73、ates still rising,the increased limits offered by primary carriers to satisfy umbrella attachment demands could be more expensive going forward.The buffer market could be a solution as the surplus lines market loses market share to the direct retail markets.Structured placements for larger auto flee

74、ts could be a better alternative when pricing approaches 50%or more of the buffer limit.Workers compensation renewals are experiencing greater price reductions,driven to offset wage inflation,as well as carrier competition for a profitable line of business.The National Council on Compensation Insura

75、nce(NCCI)reports 2021s net combined ratio for private carriers was 87%,flat to 2020,marking the eighth consecutive year of underwriting gain,and five consecutive years of combined ratio under 90%.2021 accident-year loss ratio was at 102%,the first time above 100 since 2012,which is an early indicati

76、on that soft pricing for workers compensation may be nearing an end.2021 wage inflation contributed 7.1%increase over 2020.Reserves grew to$16 billion redundant at of the end of 2021.Since 2012,the cumulative wage inflation of 35%affected indemnity claim severity.COVID-19 claims for 2020 and 2021 ha

77、ve equated to approximately 80,000 claims for$630 million in losses.1.2%of COVID claims greater than$100,000 accounted for 66%of the losses,and nearly 50%of all COVID claims over$500,000 involved a death.Healthcare and first responders continued to be the largest class of employee affected by COVID

78、losses.Umbrella and excess liability continue to contribute to a decelerating increase in rate trend.With minimal exceptions,namely auto,lead umbrella has been corrected with reduced limits,higher attachment points and increased premiums.However,limited carrier appetite for lead umbrella has tempere

79、d competition in the space.The 2022 trend of the“supported”umbrella of primary casualty has expanded into property,and other difficult-to-place lines of business.Continued return of excess capacity.Typically deployed excess global capacity reached a low of$690 million in 2021,up to$950 million in 20

80、22 and likely approaching$1.2 billion for 2023.Clients are often oversubscribed at the top of programs,driving competition,or allowing for additional limits to be purchased.Carriers are consistently offering additional limits via ventilated structures,taking$5-15 million low in a program,and an addi

81、tional$10 million or more near the top of a program structure.Carriers unwilling to participate low in a program structure,must price more competitively to remain in a high-attachment-point-only program,as markets are leveraging their down low capacity and expanding into ventilated excess positions.

82、Carriers who entered the market only offering$5 million or$10 million,are being asked to stretch to$10 or$15 million to stave off competition for the layer.Lead limits on lower hazard risks are starting to increase again.Re-opening of the courts will be closely monitored throughout 2023,as most expe

83、ct to see speedy trials and rapid settlements favoring the plaintiff.Softer-market conditions are returning,with more aggressive pricing coming from new carrier entrants to a program versus the incumbents.Emerging coverage trends PFAS/PFOA exposure under close scrutiny-limitations/exclusions is star

84、ting to appear higher in towers and some leads/primaries.Limitations on Russia/Belarus are beginning to include limitations in Ukraine as well.SML is still extremely limited.Offshore punitive damages are growing in popularity as high-profile nuclear verdicts contain large punitive components.Frequen

85、cy of punitive awards have grown from 2%to 5%in the last four years.In cases where punitive damages are sought,and case won,punitive damages are awarded 35.5%of the time.Cases where compensatory exceeds$10 million and punitive damages are sought,they are awarded 82%of the time.Contact Jon DrummondHe

86、ad of Broking,North America+1 312 288 2023 Insurance Marketplace Realities/13International casualtyStability in the marketplace continues to be the trend in recent months,with more of the same to be expected as we close out 2022.Capacity remains consistently available from the market with competitiv

87、e pricing,noting caveats relating to higher-risk exposure and individual loss records.Related lines of business will continue to impact international casualty renewals;however,recent data is showing buyers can anticipate a stable landscape benefiting from carrier confidence and healthy competition.I

88、nsureds seeking to plan for 2023 renewal budgets can achieve those goals by seeking multi-year agreements and/or early commitment to terms from their incumbent carrier.Buyers can benefit from economies of scale and overall operational efficiency by partnering with a select number of carriers who may

89、 support multiple lines of coverage.Exposure data remains an item with continued scrutiny from underwriting perspective,so insureds are encouraged to invest effort early in advance of renewal Coverage territory limitations Following federal sanctions imposed in recent months in certain regions of th

90、e world,global and regional carriers are restricting or eliminating coverage in Russia and Belarus.Coverage from global programs is also a challenge for buyers subsidiaries in Ukraine,as the landscape becomes increasingly unstable.In these cases,insureds should seek independent coverage in the local

91、 market,which may not benefit from excess/DIC limits.Key takeaway:The market for international casualty remains healthy and competitive,with ample capacity made available from carriers who continue to invest in tools and resources to deliver solutions to insureds.Rate predictionsInternational casual

92、tyFlat PFAS issues(per&poly-fluoroalkyl substances)are becoming increasingly visible,particularly for insureds in the manufacturing and retail space,and certain insureds are being asked to complete coverage questionnaires to avoid exclusionary language.Communicable disease exclusions remain fairly c

93、ommon,although the policy language is inconsistent across the market.If provided sufficient detailed information,underwriters may limit or remove the exclusionary language.Renewal results are often impacted by decisions relating to program structure and connectivity with related lines of coverage.Ad

94、ministration forms a significant portion of global program costs,which can offset direct risk-transfer rate movements at renewal.Insureds can consider options to address program administration costs by reviewing program structure and centralizing premium collection where permissible along with the c

95、ollection of exposure data.There are,however,pros and cons to making changes to program limits or how locally admitted policies are issued.For example,reducing limits and/or reducing the number of local policies can save costs;however,insureds should review how those changes might impact obligations

96、 to evidence liability limits in the local countries.Regardless of the size of the insureds business overseas,the three separate casualty renewals(U.S.,umbrella and international)should remain closely connected throughout the renewal process to prevent gaps and to leverage premium spend.Coordination

97、 among the renewals is critical,especially on issues such as occurrence and suit locations and coverage territory,as well as attachment strategy regarding excess limits.Contact Andrew EstillDirector of Operations,Global Services and SolutionsCorporate Risk and Broking+1 312 288 14/2023 Insurance Mar

98、ketplace Realities14/2023 Insurance Marketplace RealitiesMarketplace overview A two-tiered market still exists but to a lesser degree.The marketplace continues to carefully manage capacity,increase rates and issue non-renewals on challenging accounts.Social inflation,accurate property valuations and

99、 supply chain issues continue to be a main concern for insurance carriers and are driving greater scrutiny in the underwriting process and on capacity deployment.Carriers have high retention and growth goals and are aggressive in keeping accounts out of the market.Marketing efforts on clean accounts

100、 are resulting in significant rate reductions for insureds.The industries viewed as desirable include financial institutions,professional services,manufacturing(light or loss-free),technology,commercial real estate and life sciences.Insureds with notable losses and heavy cat exposures and those in c

101、ertain industry segments are considered difficult risks.The tougher classes of business continue to be habitational,transportation,healthcare,social services,hospitality,food and foundries.The property market has improved in rate and capacity,but there is still volatility for challenged occupancies,

102、CAT exposed portfolios and schedules with valuation concerns.Renewal outcomes for these risks can be particularly uncertain when facultative reinsurance is needed.Additional capacity is being reinstated by umbrella and excess markets to gain a competitive edge.As more businesses continue to become f

103、ully operational post-COVID,both exposures and loss activity have increased,particularly in some industries,lending themselves to further underwriting scrutiny.Property Property valuations have been a major area of concern for markets given inflation and supply chain challenges.Corrective action is

104、being taken via rate,increased values and coverage wording,such as specific limits or margin clauses.Contingent business income continues to see tighter underwriting guidelines and reduced limits.Cat capacity and deductible levels continue to be scrutinized and re-evaluated,and risks with heavy expo

105、sure(coastal,earthquake,flood,wildfires,wind)have become harder to place.Additional exclusions for strikes,riots and civil commotion are being seen on some hospitality,public entity,retail and real estate accounts.Water damage coverage is experiencing higher deductibles and lowered sub-limits,and wa

106、ter damage mitigation is a focus.Underwriters continue to seek accurate and complete COPE information,including age of roof.Tougher property risks that were once written on a 100%single-carrier basis are being pushed to shared/layered programs due to their risk profile and the markets unwillingness

107、to deploy their full capacity.Middle marketKey takeaway:The middle market segment continues to stabilize and,in some areas,has improved for buyers in capacity and rate.Rate predictionsFavorable risksProperty+5%to+10%General liabilityFlat to+5%Automobile+5%to+10%Workers compensation-5%to flat Umbrell

108、aFlat to+5%ExcessFlat to+5%Challenging risksProperty+15%to+20%General liability+5%to+10%Automobile+10%to+15%Workers compensation+5%to+10%Umbrella+10%to+20%Excess+10%to+20%2023 Insurance Marketplace Realities/15 Convective storm deductibles are being added in states that previously did not have them;

109、elsewhere these deductibles are being increased.Loss control visits are more frequently required prior to quoting.Affirmative cyber peril exclusions and communicable disease exclusions are being applied on property policies.General liability We see heightened concern surrounding human trafficking ex

110、posures for hospitality and real estate accounts.Sexual abuse and molestation coverage continues to face capacity reductions and scrutinized underwriting,particularly given reviver laws in several states.Most markets are no longer considering uncapped per-location aggregates.Communicable disease exc

111、lusions are still being included and can be removed with additional information regarding safety protocols.PFAS exclusions are becoming more prevalent and increased scrutiny is expected.Some carriers are willing to remove with confirmation of no exposure;however,others are taking a more stringent ap

112、proach.This is an emerging topic and carriers are concerned about the potential for class-action suits and the cost to defend.With ongoing social inflation,markets struggle to accurately project losses,pushing them to take an all-lines approach to accounts rather than have a liability-heavy portfoli

113、o.Automobile Mono-line auto risks are extremely challenging to place and should always be leveraged with other lines of business.Livery and ride-share exposures have become mandatory exclusions.Hired and non-owned auto continues to be heavily underwritten and higher exposure accounts are less desira

114、ble.Upward pressure on rates has continued as losses in the industry have increased despite fewer drivers on the road in recent years.Workers compensation Infectious disease-related exposures are closely underwritten.Remote working has created questions surrounding accurate payroll reporting,especia

115、lly in monopolistic states as coverage needs to be purchased through the state pools.Carriers are requiring details regarding return-to-work policies as they impact rating,terrorism capacity and risk control.More underwriting scrutiny can be anticipated on accounts with exposures in tougher jurisdic

116、tions.The market continues to view workers compensation as a profitable line and looks to balance books of business by writing more of it.Umbrella and excess liability Higher attachment points are being required by lead markets on both general liability and auto policies for higher risk industry.In

117、these scenarios,buffer layers are being introduced more often.Capacity for lead umbrellas has stabilized and reductions in limits have become less common.Supported leads tend to be more competitive as carriers leverage the primary lines with their umbrella capacity.In these competitive scenarios,ins

118、ureds have been able to secure increased umbrella limits,undoing retractions they may have faced in recent years.Risk purchasing groups continue to be inconsistent,with increased underwriting,appetite changes,reduced capacity,large increases and market participation changes.Clients continue to revie

119、w contractual requirements and limits purchased.Abuse and molestation,assault and battery,and sex trafficking exclusions are being added,or coverage and capacity have been limited especially where exposures are apparent.Minimum premiums have increased significantly,driving higher costs for excess la

120、yers.Contact Krista CinottiHead of Middle Market and Select Broking+1 212 915 Beth CohonEastern U.S.Middle Market Broking Leader+1 212 915 Deb Prince Western U.S.Middle Market Broking Leader+1 312 288 16/2023 Insurance Marketplace Realities16/2023 Insurance Marketplace RealitiesProfessional liabilit

121、y lines16/2023 Insurance Marketplace Realities 2023 Insurance Marketplace Realities/17Primary and excess cyber renewals are now averaging more nominal premium increases in the flat to+25%range and there are signs of capacity beginning to broaden.While Q1-Q4 2021 renewals were in the+50%to+200%range,

122、Q1-Q2 premium increases were less pronounced.Increases will still be steepest for those organizations that cannot demonstrate strong cyber risk controls,culture and overall cyber hygiene.Highly regulated industries,such as financial institutions,required to have more stringent controls,have seen rat

123、e increases on the lower end of our predicted range.Underwriting decisions are heavily influenced by the security controls a company has in place in conjunction with pricing and attachment points.Although many carriers are starting to communicate that they are open to putting up more capacity for ce

124、rtain risks,we are still waiting for this to become a reality.There are real signs of strong competition among markets,as we are often receiving two to three quotes for certain risks.Incumbents are eager to retain business.Excess placements are still challenging,because Increased Limits Factors(ILFs

125、)continue to be high.Renewals are taking longer to complete because carriers do not want to quote early for fear of an incident occurring between quoting and binding and carriers are often unwilling to provide any significant extensions.It is more important than ever to start the submission process

126、early so materials can be refined for best presentation to underwriters.Although there are finally signs of losses slowing some,ransomware and the potential for other widespread events continue to be a concern.According to Coveware,the median ransomware payment decreased by 51%in Q2 2022 over the pr

127、ior quarter,as large enterprises have invested heavily in ransomware controls such as privileged access management,endpoint detection and response and backup strategies in the period since the Colonial Pipeline cyber-attack in 2021.Cybercriminals are targeting companies in every business segment wit

128、h ransomware attacks.As these attacks become more sophisticated,threatening a firms entire electronic infrastructure,ransom demands have increased often reaching eight figures.Data breach costs remain highest in the U.S.,where the average cost of a data breach in 2021 was$9.05 million,up just under

129、5%since 2020.For the eleventh consecutive year,healthcare data breach costs were the highest,increasing from an average total cost of$7.13 million in 2020 to$9.23 million in 2021,a 29.5%increase.Ransomware attacks cost an average of$4.62 million,more expensive than the average data breach($4.24 mill

130、ion).To highlight potential vulnerabilities,certain carriers are relying more heavily on cyber security consultants for technical expertise as well as on third-party scanning technologies.Carriers are continuing to require supplemental applications for ransomware and other common events as there is

131、increased concern around systemic losses and the potential impact they could have on the broader marketplace.Key takeaway:An increased level of competition from cyber underwriters eager to write new business following the recalibration of cyber rates last year has led to more nominal rate increases

132、when organizations can demonstrate good cyber security controls year over year.Cyber riskRate predictionsQ3 2022+25%to+50%Q4 2022Flat to+25%Markets continue to constrict coverages to limit their exposure to regulatory risk,ransomware losses and other widespread cyber incidents,and they look for new

133、ways to underwrite cyber risk.Largely in response to the E.U.General Data Protection Regulation(GDPR)that went into effect in May of 2018 and the subsequent trove of data privacy legislation introduced across the U.S.,most notably the California Consumer Privacy Act and New Yorks copycat legislation

134、,Senate Bill 567,we are seeing cyber markets pull back on offering wrongful collection and compliance coverage.Certain markets have added broad SolarWinds and Log4j exclusions to their policies,making it essential for organizations to report notices of circumstances if either they or one of their ve

135、ndors use or used the software.Certain carriers have taken the drastic approach of splitting coverage into either widespread/catastrophic cyber events or limited impact events,which leaves open the possibility of applying co-insurance,sublimits,retentions and timing factors to calibrate the exposure

136、s on either side of the split.Dependent business interruption due to system failures is a concern for underwriters.Many markets are often sublimiting this coverage to half of the policy limit.Due to the frequency and severity of social engineering and cybercrime claims,certain carriers have removed

137、crime offerings from their policies,pushing the exposure to the insureds crime policies.The Russia/Ukraine conflict has led many markets to reassess their war and territorial exclusions.ContactJoe DePaulNational Cyber/E&O Practice Leader+1 973 829 Jason D.KraussFINEX NA Cyber Thought&Product Coverag

138、e Leader+1 212 915 2023 Insurance Marketplace Realities/19Broader market conditions have improved since the peak of the hard market in Q3 2020.Moderation has been significant and is expected to continue into 2023.Impact of newer capacity The influx of capacity into the market since late 2020 created

139、 competition and yielded rate deceleration throughout 2021.Throughout 2022,we have seen flattened-to-improved D&O premium outcomes.Newer markets initially generated rate relief in the excess layers;however,as markets continue to seek growth,several carriers are providing alternative primary competit

140、ion and leverage.Economic uncertainty:Recovery from a lingering pandemic has yielded economic growth;however,D&O underwriters remain concerned with uncertainties that arise from global tensions and hostilities,inflation,supply chain issues,the scaling back of government subsidies and resulting chall

141、enges surrounding continued growth and insolvencies.D&O underwriter focus:Carriers continue to scrutinize financial strength(especially liquidity);supply chain and customer demand;environmental,social and governance(ESG)practices;industry;claim history;regulatory uncertainty;loss-cost escalation;cyb

142、er and privacy;employee relations and retention;and systemic exposures.Initial public offerings(IPOs)and special purpose acquisition companies(SPACs):Despite the decrease of IPO and SPAC IPO filings in the first half of 2022(see Trends and Exposures section below),insurers remain focused on post-off

143、ering operational viability.Primary market conditions continue to be challenged for larger offerings,while conditions are improving for smaller offerings and those insureds remaining within the IPO liability window,as well as excess layers more broadly.Companies exiting IPO windows and with otherwis

144、e stable profiles may experience retention reductions and more significant decreases than the rest of the market.Private and non-profit companies:The moderation of rate increases in 2021 has continued well into 2022.Yet a“tale of two markets”for many private and not-for-profit organizations creates

145、contrasts in renewals for stable risk profiles and industries versus high-risk profiles and challenged industries.Primary:Insureds with low and stable risk profiles are seeing enhanced competition,with a minimum of flat renewals and decreases when marketed.The market for high and/or distressed risk

146、profiles remains challenging.Excess:For larger risks,excess markets have recalibrated increased limit factors(ILFs).Retentions:For challenged risks and those with large exposure increases,carriers continue to press for higher retentions.Even for smaller risks,minimum retentions are being scrutinized

147、 and regularly Directors and officers liabilityKey takeaway:Increased capacity from newer market entrants and an improved securities litigation environment continue to drive more competitive market dynamics.Rate predictionsStable risk profilesPublic company primary-7.5%to+2.5%Public company excess l

148、ayers-15%to flatPrivate,not-for-profit overall-10%to+7.5%Side A/DIC-15%to flatChallenged risk profilesNon-U.S.parent,U.S.exposuresCase-by-case basis;potential increases;may experience limited interestIPOs and SPACsCase-by-case basis;potential increases;may experience limited interestChallenged indus

149、triesCase-by-case basis;potential increases;may experience limited interest20/2023 Insurance Marketplace Realities20/2023 Insurance Marketplace Realitiesincreased.Severity of increases most often depends on prior renewal increases and the need,if any,for continued correction.Increased deployment:Car

150、riers are willing to regularly deploy capacity for preferred risks.Additional capacity can be found for more risks than in recent quarters.This is having an impact on market conditions more broadly,especially for more desirable risks.Side A:Competition among insurers for Side A business has been rei

151、nvigorated following a protracted period of rate adjustment.Competition is driven largely by newer market entrants.Underwriting:D&O portfolio adjustments will continue into 2023.We expect rates to continue deceleration into softer market conditions ahead.Much of the current market competition is in

152、the excess ABC layers,as reflected in more competitive ILFs.Some buyers remain challenged,including:Non-U.S.parent,U.S.exposures IPOs and SPACs Challenged industries,e.g.,oil and gas,healthcare,life sciences,higher education,cryptocurrency,cannabis,retail(private),restaurants(private),sports/enterta

153、inment(private)Liquidity challenged and pre-restructuring/bankruptcy risksSeveral trends and exposures bear watching.ESG:Organizations face increased pressures to address ESG concerns from operational and investment perspectives.Questions of adequacy of disclosures create both shareholder and regula

154、tory exposures.Heightened exposures have resulted in increased underwriter scrutiny into ESG practices more broadly.We note,however,the rise of cautionary messaging from state attorneys general and shareholders to ensure ESG practices do not impair profitability or investment return.Securities class

155、 actions:SCA filings totaling 218 in 2021 represented just over half of average annual filings between 2017 2019.Through Q2 2022,110 SCAs were filed which,annualized,would reflect 220 filings,essentially flat YOY.Fewer M&A-related cases filed as class actions are largely responsible for the decrease

156、 since 2019.In fact,“core”filings(i.e.,those without M&A allegations)in the first half of 2022(105)remain consistent with the 1997 2021 semiannual average number of core filings(114).Conclusion:despite a significant decrease from recent record high filing frequency,current filing frequency is in lin

157、e with historic norms.IPOs,SPACs:Initial public offering activity is down substantially,from 968 offerings in 2021 to 100 through H1 2022(200 annualized).A downward trend is expected to continue due to proposed SEC rules and government scrutiny into SPACs and de-SPAC combinations.Yet,related SCA fil

158、ings persist at high levels,with 2022 filings(21 through August)on pace to match 2021 record annual filings(33).We also have observed that several SPACs have been unable to secure acquisition targets with contractual deadlines to do so approaching.We will monitor to what degree litigation may(or may

159、 not)arise from this emerging development.Restructuring/bankruptcy/insolvency:Chapter 11 bankruptcy filings through the first half of 2022 trended below 2021 year-to-date filings and well below 2018-2020 levels.Nevertheless,there were unusually higher August 2022 Chapter 11 filings,suggesting incons

160、istent filing activity following the slowing or ending of government subsidies.Bankruptcy claims,which impact both private and public companies,can be among the most severe.D&O risk post-Dobbs(overturning Roe v.Wade):Following the U.S.Supreme Court decision in Dobbs v.Jackson Womens Health Organizat

161、ion,overturning Roe v.Wade,some companies are implementing protocols to assist employees in gaining access to healthcare services they may not be able to obtain in their own states.D&O risks arise as to possible violations of newly implemented state laws and related civil and criminal investigations

162、 and proceedings.SEC whistleblower awards on the rise:In FY 2021,the SEC awarded approximately$564 million in whistleblower awards to 108 individuals,representing the largest amount and the largest number of individuals so awarded in a single fiscal year.Stunningly,these figures are approximately th

163、e same as the total dollar amount awarded in the 11-year history of the whistleblower program.Accelerated whistleblower activity reflects heightened regulatory scrutiny and prosecutorial success.We are monitoring whistleblower award activity throughout 2022 and will report on published figures in su

164、bsequent market reports.ContactJohn M.OrrD&O Liability Product Leader,FINEX North America+1 415 955 Lawrence FineManagement Liability Coverage Leader,FINEX North America+1 212 309 2023 Insurance Marketplace Realities/21Competition is helping to stabilize the EPL market.The extent of rate increases w

165、ill be determined by many factors,particularly industry,loss history and location of employees.Assuming no change in risk profile and no losses,rate increases are more likely to be close to or at flat.California continues to be the most problematic jurisdiction.New Jersey,New York and Florida contin

166、ue to be challenging as well.Retentions:Expect continued pressure on primary retentions,as well as separate retentions for class actions,especially in California.Expect separate retentions for California claims and for highly compensated employees(particularly in healthcare and financial institution

167、s).Some domestic markets are adding separate retentions for NY,NJ and IL as well.Limits:Many domestic markets continue to provide lower limits$5 million to$10 million.Excess:As in other lines,excess EPL markets are following primary increases in addition to looking to correct increased limit factors

168、(ILFs).Capacity:Overall capacity in the EPL market is stable.New Bermuda market(AIG)adds additional capacity in the Bermuda market.Underwriting:Expect some questions regarding vaccine/return to office,ESG(specifically,diversity,equity and inclusion initiatives),pay equity audits,labor shortages and

169、supply chain challenges(depending on the industry).Coverage:Coverage remains intact;carriers continue to add privacy/biometrics exclusions and include limited COVID-19 exclusions on a case-by-case basis.COVID-19 employment-related litigation has mostly slowed down.Some litigation and COVID-19-relate

170、d claims continue mostly in healthcare.More than 6,000 cases have been filed thus far,with employment discrimination the leading claim.California has seen the most claims with New York,New Jersey and Florida following.COVID-19 class action claims are most prevalent in healthcare,with wage and hour b

171、eing the leading claim.Socially driven movements,Supreme Court decisions and changes in the economy continue to produce claims that impact employment practices liability litigation and legislation.With heightened focus on company ESG initiatives insureds should continue to expect questions from unde

172、rwriters regarding their diversity,equity and inclusion initiatives,particularly racial equity and pay equity.In relation to pay equity,there has been a push to require employers to offer pay transparency for applicants and employees.Many states are implementing laws wherein employers must disclose

173、the pay range for applicants.The U.S.Supreme Court decision in Dobbs v.Jackson Womens Health Organization,overturning Roe v.Wade,has created a patchwork of laws across the country,making it extremely difficult for employers,particularly multi-state employers,to navigate.The decision creates a potent

174、ial for an increase in certain types of claims,such as discrimination,harassment and invasion of privacy.Inflation,rising litigation costs and potential recession may lead to more employment claims.Employment practices liabilityKey takeaway:While the EPL market is still seeing some rate increases,co

175、mpetition is keeping the increases stable/modest,unless there is significant loss history and/or significant change in exposure factors.Rate predictionsPrimary(domestic markets)Flat to+10%Bermuda markets+2.5%to+10%Biometrics and artificial intelligence in the workplace continue to concern carriers.T

176、he Illinois Biometric Privacy Act(BIPA)has been the subject of many class action claims against organizations with employees in the state of Illinois.We have since seen other states implement their own biometric laws,including Texas and Washington(although neither of these laws creates a private cau

177、se of action).New York City and Portland,Oregon have similar laws which do include a private cause of action.We continue to see many EPL policies include an exclusion for BIPA claims;however,buyers can look to other coverage lines,such as general liability and cyber,for potential coverage for this e

178、xposure.Many companies are using software,including artificial intelligence and other technologies in hiring and in other employment decisions.The use of these technologies may be helpful for employers in saving time,etc.,but they may also discriminate.In May 2022 the EEOC issued guidance for employ

179、ers to help ensure that the use of artificial intelligence does not violate the Americans with Disabilities Act.ContactTalene M.CarterNational Employment Practices Liability Product LeaderFINEX North America+1 212 915 8721 2023 Insurance Marketplace Realities/23Errors and omissionsKey takeaway:As in

180、surers continue to correct rates to better align with long-term loss experience trends,the magnitude of the increases is decreasing at the primary layer level but not yet at the excess level and some insurers are reacting by reducing limits.Several years of corrective rate increases to excess pricin

181、g has attracted new insurers into the market.Rate predictionsLarge law firms+5%to+10%Mid-size law firms+5%to+10%Management consulting firms+10%to+20%Accountants+5%to+10%The overlap of professional liability and cyber continues to be a focus in the E&O marketplace.As ransomware attacks have hit profe

182、ssional firms across all industries,insurers are increasingly concerned about silent cyber exposure.Underwriters continue to place more emphasis on coordinating cyber and professional liability coverages.Lawyers Firms with poor loss experience,areas of risk management weakness or historically low ra

183、tes will see higher rate increases,while firms that are paying closer to what insurers deem rate adequacy should see rate increase ease and level off.While several excess insurers recently reduced their capacity from$10 million to$5 million,capacity is still widely available to meet the needs of lar

184、ge law firms.Excess market carriers are being less aggressive on pricing partly due to increased competition from new entrants to the market.Primary carriers continue to press for higher retentions.Although insurers have been less inclined to offer policy wording enhancements,recent new market entra

185、nts and the increased competition they have brought,especially in excess layers,have helped buyers when negotiating coverages.Professionals can expect questions on operations,financials,information security,client intake,engagement letters,staffing adequacy,lateral hires and SPACS,as well as on the

186、degree of success in implementing return-to-work rules.Rate increases vary firm to firm.Firms with poor loss experience,areas of risk management weakness or historically low rates will see higher rate increases.Better risks paying what insurers deem to be adequate rates will see lower rate increases

187、.Increases may be in the 5%range for some firms.Accountants Accounting firms are seeing premium increases in the 5%to 10%range.Underwriters are now rating on full revenue growth rather than 50%of revenue growth.Consulting firms Underwriters are worried about the scope of services provided by consult

188、ing firms.There may be a pricing penalty for firms that offer a very broad scope of services or cross the line into an operational role with clients.Premiums for management consultants are still being impacted by a very large claim payment made on behalf of a leading management consultant related to

189、 services provided to a pharmaceutical/opioid manufacturer.Technology Evolving product and service delivery technologies are pushing the edges of technology E&O into other coverages,including general liability,cyber and other types of professional liability.Internet of Things(IoT)devices are interac

190、ting with people,property and equipment in ways that can create new exposures.New property damage and bodily injury liabilities have arisen from the use of monitoring services that run on IoT technology and connected networks.These new liabilities have led to further focus on contract requirements a

191、nd interactions between insurance policies.Carriers remain hesitant to offer excess technology coverage on blended technology-cyber programs.Errors and omissions(E&O),or professional liability,is arguably the most complex area of specialized insurance,with several distinct marketplaces:Stand-alone E

192、&O for certain professions(lawyers,consultants,accountants).Technology E&O,sometimes stand-alone,but often coupled with cyber insurance.Miscellaneous professional liability(MPL),including those industries without a specific,dedicated policy form.ContactJoe DePaulNational Cyber/E&O Practice Leader+1

193、973 829 2972 Jason D.KraussFINEX NA Cyber Thought&Product Coverage Leader+1 212 915 8374 2023 Insurance Marketplace Realities/25ContactMatt KleinNational Fidelity Product Leader+1 212 309 5515 Colleen KutnerU.S.Fidelity Thought Leader+1 303 765 1546 Fidelity/crimeKey takeaway:In most instances,fidel

194、ity and crime underwriters have returned to pricing renewals based on changes in exposure year over year,though some insurers are continuing to right-size premium allocation tied to social engineering coverage.Rate predictionsSocial engineering continues to be a focus for underwriters.Social enginee

195、ring coverage remains largely sub-limited.The availability of higher limits is contingent upon the strength of the buyers controls and procedures and,when available,will generally result in a higher premium.Expect limited appetite for extending social engineering to cover loss of“other property.”Blo

196、ckchain,NFTs and digital assets OH MY!Fidelity and crime insurers are hesitant to cover these digital asset categories.Some insurers are imposing non-fungible token and crypto/virtual currency exclusions,even if there is little or no exposure.Capacity is primarily available out of London where insur

197、ers will consider writing established,custodial risks with meaningful deductibles and premium values.Courts continue to debate the meaning of direct loss,leading insurers to impose additional policy exclusions.Courts remain divided in their interpretation of direct loss with respect to social engine

198、ering fraud schemes.The fidelity and crime market has responded by adding exclusionary language for social engineering fraud,except where explicitly covered under a social engineering insuring agreement.In G&G Oil Co vs.Continental Western Insurance Company,the Indiana Supreme Court held that a rans

199、omware attack is covered under the computer fraud insuring agreement of a crime policy.The court applied a proximate cause test and concluded that the ransom paid was a covered loss.The decision has led to insurers imposing cyber extortion exclusions on fidelity and crime policies.Fidelity/crimeFlat

200、 to+5%26/2023 Insurance Marketplace Realities26/2023 Insurance Marketplace Realities Fiduciary liabilityKey takeaway:Premiums have been leveling off,with more renewals on the lower end of ranges.As the previously limited market for primary fiduciary shows some signs of expansion,we expect soon to se

201、e more flat renewals.Class action retentions remain in a seven-figure range,more below$5 million than above it.Rate predictionsSmall public/nonprofit(defined contribution pension plan assets up to$50M)Flat to+10%Mid-sized public/nonprofit(plans asset$50M to$500M)+5%to+25%Large public/nonprofit(plan

202、assets above$500M)+10%to+40%Financial institutions +5%to+25%Underwriters continue to be wary of fiduciary risks,but there has been some stabilization.Underwriting focus:Excessive fee class action volume appears to have returned somewhat,with 42 cases being filed in the first half of 2022(versus only

203、 54 in all of 2021,but almost 100 in 2020).Although many recent settlements have been substantially below$5 million(previously most settlements exceeded$10 million),carriers are still concerned about perceived unpredictability,high costs of defense and the substantial number of still pending cases.T

204、he U.S.Supreme Courts pro-plaintiff ruling in the Northwestern University excessive fee case disappointed insureds who hoped that a victory for the defense could reverse the negative pricing trends in fiduciary liability;although the Courts holding was very narrow,many carriers have tried to use it

205、as a justification for continued tough terms and threatened escalation.However,recent positive precedents in the Sixth and Seventh Circuits(discussed below),plus more interested markets,have started to counteract the effects of the Northwestern decision and contribute to smaller premium increases wh

206、ich may be heading toward flat renewals.Particularly with commercial and large nonprofit(university and hospital)risks,underwriters are focused on defined contribution pension plans with assets greater than$250 million,where previously the cut-off had been$1 billion(some carriers dont want to quote

207、plans with assets above$1 billion).Even smaller plans cause concern,now that a few smaller plaintiff firms have targeted them.Insurers now seek detailed information about fund fees,record keeping costs,investment performance,share class,vendor vetting process and plan governance,causing some insured

208、s to seek assistance from their vendors in filling out applications.A wave of class actions filed by one law firm against sponsors whose 401k plans include BlackRock target date funds has caused some carriers to focus on this exposure in their underwriting,although the BlackRock funds in question ha

209、ve been highly rated and M has published an article criticizing the lawsuits.Retentions/sub-limits:Insurers are even more focused on retentions than on premiums.First-dollar coverage has become almost impossible to obtain.Increased retentions of seven figures remain commonplace for specific exposure

210、s,e.g.,prohibited transactions/excessive fees and sometimes all mass/class actions,with at least one carrier insisting on eight-figure retentions.Carriers are attempting to push retentions even higher,but insureds who already have seven-figure retentions have generally been successful in resisting i

211、ncreases.Even the non-class action retentions are generally six figures now(previously five figures).Some insurers may only offer a sub-limit of liability or exclude entirely prohibited transactions/excessive fees coverage.Marketplace results will vary with plan asset size,plan governance and claim

212、history,but it is a challenge to get credit for positive risk factors.Coverage breadth remains steady:Other than increasing retentions,carriers have not generally been restricting coverage.It should be noted,however,that terms can vary substantially.Many carriers are still receptive to offering cove

213、rage enhancing endorsements.2023 Insurance Marketplace Realities/27 Blended coverage:Many organizations,including financial institutions and private/non-profit companies,continue to buy fiduciary liability coverage as part of a package policy,which in some cases has softened the marketplace challeng

214、es.Is some relief in sight?Yes.While some carriers have all but left the market,and others have expressed little interest in writing new business,some traditional financial line markets that have not historically written much fiduciary risk have begun to provide alternatives(particularly if there ar

215、e related primary D&O opportunities).Most carriers are closely monitoring the capacity they are putting out,and$5 million primary limits are now more common than$10 million.Rate prediction qualification:Rate increases may be higher or lower depending on the insureds existing pricing.Insureds who hav

216、e already had at least one round of double-digit percentage premium increases may be able to keep increases to a range of+5%to+15%.Soon,we expect to see flat renewals becoming more common.Price per million of coverage can vary substantially among risk classifications,notably those involving plans wi

217、th proprietary funds.Many accounts are still viewed by carriers as challenged,particularly in certain industries.Challenged classes include financial institutions with proprietary funds in their plans,whether currently or in the past,especially if they have not yet been the subject of a prohibited t

218、ransaction claim.However,financial institutions without proprietary funds in their plans and/or who accept relevant exclusions and/or already have elevated premiums are seeing smaller increases.In the nonprofit space,large universities and hospitals have seen some of the most substantial premium and

219、 retention increases and have struggled to find placement.This was the result of a wave of excessive fee cases in this sector in recent years.However,the lull in university suits has been helpful in that sector,while hospital systems remain severely challenged.Underwriters continue to focus on such

220、issues as excessive revenue sharing,uncapped asset-based vendor compensation,expensive retail share class investments,expensive actively managed funds,lack of regular benchmarking and RFP processes.Some carriers are nervous about potential insureds who have recently improved their processes but migh

221、t be attractive targets for plaintiff firms who would make allegations about the prior period.Virtually any organization may be treated as risky by some carriers,and it can be challenging to get credit for best practices.Broader economic challenges may be increasing risks.Underwriters have focused o

222、n defined contribution plan risks and have not paid as much attention to other types of plans,especially health and welfare plans.However,this could change if economic uncertainties accelerate these risks.Cutbacks in benefits(particularly retiree medical benefits)and/or workforces may lead to claims

223、 and potentially large class actions.Entities that still sponsor defined benefit pension plans and saw their funding status improve substantially during 2021,have more recently seen declines in funding levels.Litigation volume in first half of 2022 approaches 2020 high after a drop in 2021;legislati

224、ve and regulatory changes create uncertainty.In 2021,excessive fee claim frequency dropped significantly from its 2020 highs:For over a decade,a growing number of plaintiff firms have been suing diverse public,private and non-profit entities,making allegations involving allegedly excessive investmen

225、t and/or recordkeeping fees that resulted in reduced investment principle and reduced returns;many of these class actions also alleged sustained periods of underperformance by specific investment options.Excessive fee class action frequency rose again in 2022 after dropping about 40%in 2021 from 202

226、0 highs(42 cases filed in the first half of 2022),with more than 100 cases ongoing.Several recent excessive fee settlements have been modest(between$1 million and$5 million,mostly on the lower end)than previously.Since the U.S.Supreme Courts pro-plaintiff Northwestern decision,few excessive fee case

227、s have been dismissed,but recent positive precedent from the Sixth and Seventh Circuits(CommonSpirit Health and Oshkosh respectively,discussed below)may show some pro-defense momentum.Other types of class actions persist:Suits against defined benefit plans alleging reduced benefits due to the use of

228、 outdated mortality table assumptions continue to be litigated,as well as class actions involving COBRA notice deficiencies or improper benefit reductions.28/2023 Insurance Marketplace Realities28/2023 Insurance Marketplace Realities Employer stock class actions against public companies remain virtu

229、ally nonexistent,but private companies ESOPs can still see claims:In the continuing aftermath of the U.S.Supreme Courts decision in Fifth Third Bank v.Dudenhoeffer,very few employer stock drop class actions have been filed,and those few continue to be dismissed and affirmed on appeal.Nonetheless,car

230、riers remain concerned about employer stock in plans;they will often exclude employer stock ownership plans or include elevated retentions.Meanwhile,class actions against private companies with employer stock plans,mostly arising from valuation issues in connection with establishing or shutting down

231、 such plans,continue to be filed occasionally and are seldom dismissed on early motion.Risks post the Dobbs decision:Following the U.S.Supreme Court decision in Dobbs v.Jackson Womens Health Organization,overturning Roe v.Wade,some companies are implementing protocols to assist employees in gaining

232、access to healthcare services they may not be able to obtain in their own states.Fiduciary risks can arise as to possible violations of newly implemented state laws and related civil and criminal investigations and proceedings,raising questions concerning the scope of ERISA preemption.Some employee

233、participants might complain about benefit cutbacks,while others might complain about discrimination.Plan sponsors may also face challenges complying with ERISAs technical requirements in connection with plan changes and creation.The U.S.Department of Labor may now bring more previously time-barred c

234、ases:The DOL achieved a decision that it is generally entitled to the longer six-year statute of limitations(as opposed to the three-year limitation period which is triggered by“actual knowledge”of a violation of ERISA)in which to bring a claim,even if information from which a breach could have been

235、 detected was included in a Form 5500 that was filed with the DOL.The court did,however,caution that the DOL could not rely on the longer statute of limitations if it was“willfully blind.”Walsh v.Bowers,2021 WL 4240365(D.C.Hawaii,Sept.17,2021).The Department of Labor has launched several plan cyber

236、audits:In April 2021,the DOL issued guidance providing tips and best practices to help retirement plan sponsors and fiduciaries better manage cybersecurity risks.Not long after,the DOL initiated many audits regarding retirement plan cybersecurity practices and has continued to do so.IRS giving 90-da

237、y warning on audits:On June 3,the Internal Revenue Service announced a new pilot program for retirement plans to promote compliance while reducing audit costs.Under the Pre-Examination Compliance Pilot,the IRS is notifying retirement plan sponsors 90 days in advance that their plan has been selected

238、 for an audit.The plan sponsor then has 90 days to review its plan documents and operations,and to correct any compliance issues that may be discovered.This new procedure offers a potentially substantial advantage to plan sponsors,since voluntary compliance program(VCP)fees are lower than the audit

239、cap fees that apply to errors found during IRS audits.Previously the VCP program was not available to sponsors who had been identified for audit.Most fiduciary liability policies provide coverage in relation to VCPs,usually without application of a retention.ESG rules and risks The Department of Lab

240、ors proposed new rule regarding Environmental,Social and Governance(ESG)investing achieved final rule status:On October 14,2021,the Department of Labor(DOL)published for comment a new rule which would undo the previous administrations 2020 rule that was perceived as discouraging retirement plans fro

241、m investing in ESG-related investment options by putting a burden on fiduciaries to justify such investments.As the DOL explained in the Supplemental Information provided when they published the rule in the Federal Register,the change is“intended to counteract negative perception of the use of clima

242、te change and other ESG factors in investment decisions caused by the 2020 Rules,and to clarify that a fiduciarys duty of prudence may often require an evaluation of the effect of climate change and/or government policy changes to address climate change on investments risks and returns.”On November

243、22,2022,the DOL published the final rule and a summary fact sheet.The official press release was entitled:“U.S.Department of Labor Announces Final Rule to Remove Barriers to Considering Environmental,Social,Governance Factors in Plan Investments”.The final rule retains the core principle that the du

244、ties of prudence and loyalty require ERISA plan fiduciaries to focus on relevant risk-return factors and not subordinate the interests of participants and beneficiaries.2023 Insurance Marketplace Realities/29 DOL request for information from interested parties:In relation to climate risk,EBSA/DOL ha

245、s been considering going further than the standard discussed above and on February 11,2022 issued a request for information seeking public input on how to implement a 5/20/21 Executive Order to protect pension plans from such risks.Under consideration are mandatory disclosures on Form 5500s or elsew

246、here concerning plan investment policies,climate-related metrics of service providers,plan fiduciary awareness of climate-related financial risk and much more.Although responses were due by May 16,2022,EBSA hasnt yet made further public comment on this issue.New SEC rules seek to offer guidance to i

247、nvestors concerned with ESG bona fides:The SEC is looking to step up regulation concerning funds which purport to be ESG-friendly.Pooled employer plans(SECURE Act):The Setting Every Community Up for Retirement Enhancement Act(SECURE Act)amended provisions of federal law,including ERISA,to establish

248、a new form of multiple employer plan(MEP)called a pooled employer plan(PEP),which allows employers to join and delegate both investment and plan administration fiduciary obligations to pooled plan providers(PPPs).PEPs and PPPs need to ensure that they have sufficient and appropriately tailored fiduc

249、iary liability insurance to address emerging exposures contemplated in PPP/PEP arrangements.A slowly increasing number of small employers are joining PEPs.SECURE ACT 2.0:After review by relevant committees,the Senate now has the framework for its version of Securing A Strong Retirement Act(SECURE 2.

250、0).A version of SECURE 2.0 passed in the U.S.House of Representatives on March 29,2022,by an overwhelming bipartisan 414 to 5 margin.If passed by the Senate in its current form,the bill would expand automatic enrollment in defined contribution plans by requiring new 401(k),403(b)and SIMPLE plans to

251、automatically enroll participants upon becoming eligible,with the ability for employees to opt out of coverage.Among other things,SECURE 2.0 also enhances the retirement plan start-up credit,making it easier for small businesses to sponsor a retirement plan.The legislation further increases the requ

252、ired minimum distribution age to 75 and indexes the catch-up contribution limit for individual retirement accounts.The legislation also allows employers to match employee student loan repayments with retirement account contributions.It is also likely that non-profit 403(b)plans will soon be allowed

253、to offer collective investment trusts(CITs),which often have lower fee structures than mutual funds,as options.It is expected that the House and Senate versions will be reconciled into final legislation during the coming months.Whenever the final bill is passed,fiduciaries are going to have to educa

254、te themselves about the new playing field and facilitate passing on the benefits to their plan participants.Plaintiff class action lawyers will be prepared to second guess plan fiduciaries.COVID-19 relief legislation:The American Rescue Plan Act(the Act),which was passed in March of 2021,has been pr

255、oviding pandemic-related financial support to families as well as temporary COBRA and Affordable Care Act subsidies.The Act also extended funding stabilization for single-employer pension plans,modifications to executive compensation rules,as well as financial assistance for certain multi-employer p

256、ension plans.So far,the Act has resulted in large payments to two critically underfunded multiemployer pension funds.In July,2022,the White House announced that“over$40 billion in American Rescue Plan funds have been committed to strengthening and expanding our workforce.”U.S.Supreme Court decides N

257、orthwestern University excessive fee case for plaintiffs.On January 24 the U.S.Supreme Court issued its eagerly awaited decision in the Northwestern University excessive fee case,finding for the plaintiffs and remanding the case back to the Seventh Circuit.The Seventh Circuit had affirmed a holding

258、that dismissed the case,which arose from the offering of allegedly imprudent investment options,solely because plaintiffs were offered other indisputably prudent investment choices.The Supreme Courts decision rejected the Seventh Circuits uniquely extreme position on the“investment choice”defense.Un

259、fortunately,the decision did not provide meaningful additional guidance concerning what constitutes sufficient specificity to establish a plausible pleading other than cautioning future courts that“at times,the circumstances facing an ERISA fiduciary will implicate difficult tradeoffs,and courts mus

260、t give due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise.”30/2023 Insurance Marketplace Realities30/2023 Insurance Marketplace RealitiesSince the Northwestern decision:Initially,district courts became even more reluctant to dismiss cases on in

261、itial motion.More recently,however,the Sixth Circuit affirmed the dismissal of the excessive fee class action against CommonSpirit Health,and the Seventh Circuit affirmed the dismissal of the class action against Oshkosh Corporation.The courts in both cases stated that the Northwestern decision did

262、not remove the requirement for courts to act as gatekeepers as to whether pleading standards are met in the first instance.Both courts quoted the most pro-defense sentence from the Northwestern decision,which pointed out that“at times,the circumstances facing an ERISA fiduciary will implicate diffic

263、ult tradeoffs,and courts must give due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise.”Both courts found that plaintiffs,despite having pointed to other allegedly comparable but better plans and investments,had failed to establish that they wer

264、e in fact comparable and indicative of likely imprudence.The Seventh Circuit cited the Sixth Circuits detailed decision with approval,a trend which may continue in other jurisdictions.Also,within the Sixth and Seventh Circuits there have been submissions of supplemental authority and motions for rec

265、onsideration filed by defendants whose motions to dismiss were previously denied.For more detail,see CommonSpirit Health and Oshkosh.Buyers should keep on an eye on key loss drivers.Excessive fees:As discussed above,excessive fee claim frequency rose in the first half of 2022 after having dropped ab

266、out 40%in 2021 from 2020 highs(44 cases filed in the first half of 2022),with more than 100 cases ongoing.Financial institutions:Excessive fee claims against financial institutions often include allegations that plan participants were disadvantaged due to conflicts of interest that influenced the pl

267、an sponsor to include its own overpriced investment options in the plan;such claims tend to settle for substantially more than class actions without such alleged conflicts of interest.Any sized plan can be a target:Although the first excessive fee cases seemed to focus on specific industries and pla

268、ns whose assets exceeded$1 billion,in recent years the perception is that no plan is safe.Various public,private,multiple employer and nonprofit entities have been sued,and even plans with assets below$100 million have been targeted(although suits against plans with assets below$1 billion have not r

269、esulted in any eight-figure settlements).M&A:Carriers may apply increased scrutiny to insured with substantial merger and acquisition and/or spin-off activities,which can lead to changes in benefits and related complaints.Positive risk factors:It can be difficult to get credit from carriers for posi

270、tive risk factors,but the effort can yield results.Among the factors to emphasize are the quality of advisors and degree of delegation,as well as favorable venues.No claim yet?Not so fast:Organizations that have not been the subject of claim activity may not necessarily be viewed as a better risk.Pa

271、rticularly for financial institutions with proprietary funds in their plans,currently or historically;insurers may assume that a proprietary fund-related claim is likely at some point.In general,carriers are aware of ERISAs long statute of limitations(six years)and are therefore more concerned with

272、past practices than they might be in connection with other policies.Limit adequacy:As fiduciary rates rose;some insureds may have cut the size of their towers.As rates come back down,insureds might consider increasing their limits,notwithstanding that many recent settlements have been in the low sev

273、en figures.ContactLawrence FineManagement Liability Coverage Leader,FINEX North America+1 212 309 John M.OrrD&O Liability Product Leader,FINEX North America+1 415 955 0196 2023 Insurance Marketplace Realities/31Financial institutions FINEXKey takeaway:Competition among insurers has increased across

274、all lines for financial institutions,resulting in a deceleration of rate increases and,in some coverages,rate decreases.Rate predictionsD&O Publicly traded financial institutions;Primary-5%to+2.5%D&O Publicly traded financial institutions;Excess/Side A-15%to flatD&O-Private financial institutions-10

275、%to+2.5%D&O/E&O-Asset managers(excluding private equity/general partnership liability)-10%to flatBankers professional liability(BPL)Flat to+7.5%Insurance company professional liability(ICPL)Flat to+10%Market conditions are softening,which will likely continue through the first half of 2023,with pote

276、ntially some flattening out in Q2 2023.The influx of new capacity,strong growth targets for both new markets and established insurers,and the lack of IPO and SPAC activity have contributed to the increased competition in the marketplace.Most insurers headed into 2022 with positive rate targets,but t

277、he competition accelerated on the late Q2 2022 renewals,likely as insurers assessed their first-half performance against annual targets.While most insurers are supporting flat rates and/or rate decreases,some are stepping away from programs where the rates no longer make sense.There is a general con

278、cern that the softening in rates with a potential recession in 2023 will result in inadequately priced business,which is what insurers have focused on remediating over the past couple of years.New market entrants entered the marketplace deploying excess capacity,but some have now issued primary form

279、s with the goal of writing primary and being viewed more favorably for an excess attachment because of their primary capabilities.Financial institutions continue to explore the use(or expanded use)of captives,alternative program structures,self-insurance and risk financing portfolio analytics to bet

280、ter manage program volatility.Key emerging risk trends that are top of mind for financial institutions include economic uncertainty,ESG(with an emphasis on climate,inclusion and diversity),digital assets and cybersecurity threats.Driving economic uncertainty are interest rate hikes,high inflation,an

281、ticipated hard landing for the economy,market volatility and geopolitical risks.Financial institutions are positioning their businesses and portfolios to ensure that they can weather continued volatility and a downturn in the economy.Financial institution D&O rates are trending downward with primary

282、 rates at flat-to-low single digit decreases,and excess rates experiencing double digit decreases.The financial institution D&O marketplace has become very competitive.There is increased competition on primary layers with the strategy to aggressively quote primary terms to secure a low excess positi

283、on.Insurers are looking to move down on towers where there is more rate and add more capacity,typically ventilated throughout a program.While we saw alignment between primary,excess and Side A rates in Q4 2021 and the first half of this year,we have seen the excess rates diverge again with larger de

284、creases than the primary,resulting in excess increased limit factors(ILFs)coming down.32/2023 Insurance Marketplace Realities32/2023 Insurance Marketplace Realities Certain insurers are strategically targeting Side A D&O capacity if they write the primary D&O ABC layer.Insurers are willing to consid

285、er enhanced coverage terms and have moved away from any tightening of terms.Professional liability(E&O)varies by subsector,with regulatory trends a key focus by underwriters across all subsectors.Asset managers:Insurers continue to have a targeted appetite for asset managers,with several insurers re

286、leasing new primary forms,including some new market entrants.This has led to aggressive competition in the marketplace for both primary and excess.Across the financial institutions industry,rate increases have come down most for asset management D&O/E&O programs,with rate decreases being much more c

287、ommon.Coverage remains stable,though a limited number of insurers have sought to apply language intended to eliminate ambiguity for cyber events by clarifying what is and is not covered.Insurance companies:Rates have stabilized with any increases in the low to high single digits.Primary capacity con

288、tinues to be limited with few viable insurers looking to write new business.However,some insurers have released new primary ICPL forms and,after several renewals with rate and retention increases,some insurers are willing to revisit programs that they had previously exited.“Silent”cyber exclusions a

289、re often applied to ICPL policies.Some insurers outright exclude cover relating to cost of insurance(COI)claims against life insurers,but we are seeing signs that other insurers may be willing to offer COI coverage subject to higher retentions and significant additional premium.Banks:BPL continues t

290、o be a more challenging line,but rate and retention increases have largely stabilized.Rate increases have moderated and shown signs of flattening.Retention increases were largely applied over the past two years,but for those banks that still have aggressive retentions relative to size/exposures,ther

291、e will likely be pressure to increase the retention.Primary capacity for large banks continues to be limited;however,as insurers look to grow,there has been renewed interest,and some insurers are aggressively pursuing primary and low excess layers.New market entrants have increased competition on ex

292、cess capacity.Several trends and exposures bear watching.Crypto/digital assets:There has been a lack of regulatory guidance around digital asset activities for financial institutions,leading many companies to cautiously approach any digital asset products or services.The Biden administration release

293、d its first-ever crypto regulatory framework in September providing some direction,but it leaves many key questions unanswered requiring further exploration(i.e.,is crypto a security).The framework also comments on a U.S.central bank digital currency and its potential benefits but seems limited to f

294、urther consideration by an interagency working group to review the implications.ESG:Regulatory scrutiny of ESG-related products and strategies continues to increase.In May of this year,the SEC proposed new rules intended to protect investors in ESG-themed investment products,which would impact inves

295、tment advisers and mutual funds.State AGs are becoming more active in ESG policies and have recently brought a multi-state investigation against several large banks for their involvement in the U.N.s Net-Zero Banking Alliance and ESG investing,which the states feel will inhibit lending to the fossil

296、-fuel sector.ContactHeather KaneU.S.Head of FINEX Financial Institutions+1 212 915 2023 Insurance Marketplace Realities/33Speciality lines and solutions 2023 Insurance Marketplace Realities/3334/2023 Insurance Marketplace Realities34/2023 Insurance Marketplace RealitiesAerospaceKey takeaway:Except f

297、or war coverage,the market remains stable as insurers take a measured“wait and see”approach to the potential impact of Russias confiscation of aircraft.However,this could shift in 2023 if losses manifest in the market,at which time all segments of the aviation insurance marketplace could be impacted

298、 as the hull war market is simply too small to absorb a$10 billion+loss on its own,and the reinsurance marketplace is relatively finite when compared to the P&C(property&casualty)market,which could result in the direct and reinsurance markets seeking to recover their losses in other segments.Rate pr

299、edictionsAirlinesFlat,but up to+10%with fleet growthAirline hull war+100%to+250%Airline excess war liability+50%Aircraft lessors/banks+50%with multiples for hull warProducts manufacturers and service providers+5%to+10%Airports and municipalities+5%to+10%General aviation+5%to+10%SpaceRate changes dep

300、end on risk and limit;percentage range not applicableAirlinesWith exposures bouncing back,plenty of capacity and below-average claim activity,the rating should be stable going into 2023.Insurers are looking to grow and compete for premium income.Exposures have bounced back,although with some regiona

301、l variations.Rating is already at high levels.Markets show two years of profits.However,reinsurers could tighten their costs should war claims spill over to the H&L market.Hull war and excess war liability,premium and rating The Russia/Ukraine crisis and resulting sanctions have produced catastrophi

302、c claim activity for the hull war market.The current market premium is completely inadequate to support the claims.Rates are going up 100%to 250%across the board.Coverage and aggregate limits will be impacted.Reinsurers are driving the rating activity;several large insurers have pulled out completel

303、y.Opportunistic markets have entered/will enter the market,which should stabilize the market in 2023.Aircraft lessors/banksHard market conditions prevail with increased emphasis on geographic aggregation of assets;hull war sub-class remains highly volatile.The impact of sanctions on Russia could lea

304、d to an unprecedented aviation market claim with insurers being exposed to previously unquantified hull exposures.Preliminary expectations for total industry losses range from$10 billion to$20 billion and,while the uncertainty of the overall loss magnitude continues,risk perception has already shift

305、ed for both direct and reinsurance markets.The historical premium base for this class has been low and,with losses concentrated in this class,this will lead to disproportional cost increases.Insurers continue to assess exposure and liabilities to Ukraine,Russia and surrounding areas.Combined impact

306、of the Ukraine crisis and developing airline assets held in Russia are expected to have a far-reaching impact on this class.2023 Insurance Marketplace Realities/35 Increased claim activity has continued(this in addition to prior-year losses developed from many repossessions).Insurers remain focused

307、on geographic aggregation of assets and broader geo-political perils.Overall market capacity remains adequate following several withdrawals;insurers begin to introduce sub-limit(s)and cover limitations with focus on aggregation.Increased underwriting oversight from insurer senior management;insurers

308、 own reinsurance renewals expected to further restrict and limit coverage.Volatility within hull war rating can be tempered if confiscation etc.(paragraph(e)perils of wording)are excluded,the market is very distorted,and a“balance”remains to be found on coverage and price.Product manufacturers and s

309、ervice providersWhile the shadow of the Russia/Ukraine crisis looms over the aviation insurance market,aerospace organizations renewing in 2022 have so far avoided any significant impact to their programs.It is very possible that this could change any time.Therefore,our advice for those renewing is

310、to engage with their team early to get terms and support secured,as it is challenging to anticipate the direction the market will take and when a shift might occur.Insurers are still pushing for premium increases(+5%);however,flat renewals are achievable where there are no new losses or deterioratio

311、n.This has come following two years of improved profitability for insurers,encouraging growth in capacity,which has led to a deceleration of movement in market conditions.A few insurers see this as the moment to seize larger shares on desirable risks in anticipation of the market hardening once agai

312、n,this time because of the Russian/Ukraine crisis.The direct aviation insurers rely heavily on reinsurance,and reinsurers who were already smarting from the Boeing Max loss are looking closely at direct insurer exposure to Russia/Ukraine;we are seeing coverage restrictions being imposed especially r

313、egarding hull war and war liability writebacks.36/2023 Insurance Marketplace Realities36/2023 Insurance Marketplace RealitiesGeneral aviationUnderwriters will continue to push for some uplift in rates,while remaining focused on 12-month model-specific SIM pilot training as well as retaining their bo

314、ok of business.Inflation and increasing claim costs remain a major concern for underwriters.Underwriters are citing inflation as a main driver for an uplift in rates.Supply chain constraints and labor shortage continue to increase the cost of repairs and aircraft down time,effectively increasing the

315、 total cost of claims.The award on the Allied Aviation loss caused nervousness among insurers in Q4 of 2021 and served as a reminder of the potential for runaway jury awards in the U.S.New capacity is being deployed by new and existing markets,which is putting pressure on underwriters to offer more

316、competitive pricing on larger quota share placements.Underwriters are inclined to stay on current business and are not very aggressive on new business due to uncertainty in the market regarding potential increased reinsurance costs and Russia/Ukraine.We have not seen any major changes in coverages a

317、nd sub-limits,as underwriters have been closely reviewing and reducing these over the last couple of years;however,we have seen agreed hull values being reviewed both midterm and at renewal.Environmental,social and governmental(ESG)stances of carriers continue to translate into more restrictive unde

318、rwriting on risks that present an adverse picture on sustainability(e.g.,older aircraft with less efficient/higher carbon emission engines).Airports and municipalitiesAircraft and passenger traffic is rebounding in a post-COVID era,driving increased exposures on site.Also,large,and unique verdicts c

319、ontinue to keep the social inflation and nuclear verdicts fresh in carriers sights,leading to a general sense that pricing remains inadequate.Though rating increases continue,we have seen a shift to individual account assessment with more significant changes in appetite,structure and rating if there

320、 is an unfavorable loss history.Coverage adjustments to non-aviation excess limits have occurred in the past few years and are less significant moving forward.There is a sense of a more competitive environment,though all markets are still seeking what they determine to be adequate rates.Vertical pla

321、cements(quota-share)are a good solution to engage capacity on larger-limit accounts and establish a more stable program for the future.SpaceSince the rate corrections of 2019 2020,this sector has stabilized and embraced a more disciplined underwriting approach.Risk differentiation is now based on li

322、mit requirements and technology-based risk variations.Premium rates have remained stable over 2021 2022,with rate reductions only on risks with significant technical heritage.The markets annual premium income target remains$750 million,but it has not reached that target yet.Annual market income has

323、been hampered from 2020 2022 by pandemic-related project delays and supply chain issues.New insurers/capacity have come into the market to replace exited/decreased capacity.ContactJason SaundersSenior Director,Head of Global Aerospace North America+1 404 224 2023 Insurance Marketplace Realities/37Al

324、ternative risk transfer(ART)Key takeaway:Parametric and structured solutions continue to be the focus of the ART market in 2023.Portfolio/integrated risk products renewing in 2023 face the impact of cumulative changes in the market since binding three years ago.Rate predictionsStructured programsFla

325、tParametric nat cat-5%to+5%Parametric weather index programsFlat to+5%(+20%to +30%Asia)Parametric pandemic programsFlatPortfolio programs+25%to+40%over 3-years (7-12%annually)Captive stop lossFlat to+5%Markets continue to navigate poorly qualified and structured opportunities.ART deals supported by

326、robust analytics and negotiated over realistic timeframes continue to fare better.The parametric market,now established for many risks,continues to increase market share through complementing existing placements,addressing increasing gaps in traditional coverage,or by providing novel capacity for ES

327、G risks.Lenders are increasingly accepting parametric solutions,reducing historical barriers to utilization.38/2023 Insurance Marketplace Realities38/2023 Insurance Marketplace Realities Structured solutions embedded in recent years are now expanding into other lines of business.Having been establis

328、hed to address a specific need,typically in primary property or casualty lines,clients are leveraging their investment in the mechanism to drive efficiencies into other lines of business.As in property and casualty,fronting is now being aggressively deployed to address such risks as cyber,where insu

329、reds balance the prospect of no/limited risk transfer and contractual requirements.Captive use has increased,though that has not necessarily translated into multiline stop loss or other ART approaches,as insureds simply retain risk.Portfolio/integrated risk products are attracting less attention;how

330、ever,they do continue to perform favorably when compared to many monoline equivalent programs.Underwriters do continue to focus on their structured solutions books.Parametric solutions Natural catastrophe risks Parametric hurricane and earthquake programs are the mainstay of ART.However,capacity may

331、 become constrained due to potentially challenging 1/1 reinsurance renewals.ART is increasingly deployed by sovereign and public entities to aid in disaster recovery and the protection of ecosystems,such as reefs and nature preserves.Insureds aware of the limitations of traditional property policies

332、 are realizing the broader potential for ESG-linked uses of ART approaches.Deployment has increased for hail,flood(water height)and wildfire,with new products emerging for tornadoes,pandemics and third-party cloud service provider outage.Typical use continues to be as a complement to the property pl

333、acement,in-filling deductibles,topping up sublimits or covering uninsured risks(such as non-damage business interruption risk).The simple,easy-to-communicate structures and quick settlement are key drivers.Captive participation is increasing often through quota share participation or fronting for parametric reinsurance.This is in support of a companys risk and ESG agenda.While few see parametric s