Property replaces cyber as ‘most troubled’ line
By Erin Ayers, Advisen
Commercial property/casualty prices continued to rise in the fourth quarter of 2022 with an average increase of 8% across all accounts sizes, down slightly from 8.1% in Q3, according to the latest data from the Council of Insurance Agents & Brokers (CIAB).
Large business saw higher price increases on average (9.1%) than medium (8.3%) or small (6.5%), CIAB reported. Q4 2022 marked the 21 consecutive quarter of average price increases.
Some lines showed continued moderation -- brokers saw signs of relief on cyber and umbrella pricing in Q4. Umbrella price increases fell out of the double-digit range to 9.6% for the first time in 12 quarters. Workers compensation prices also continued to soften, with an average decrease of 1.1%.
However, commercial property overtook cyber as the “most troubled” line for the first time in seven quarters, CIAB found, with an average premium increase of 16% in Q4.
Brokers placing property risks faced tougher underwriting and a tighter market – 89% of respondents saw less available capacity last quarter. Property valuations took center stage as underwriters demanded updated estimates for replacement costs.
“Insurance to value (ITV) was the key discussion item on property,” said one respondent from the Northeast, citing the impact of inflation and the cost of materials on property premiums. The impact of Hurricanes Ian and Nicole, along with severe convective storms in the Midwest, had insurers looking to reduce their exposure. “
Underwriters required higher deductibles, higher pricing, and more restrictive terms on property risks, using much more ‘layering’ on property risks of any size,” said a broker from a Southeast firm.
Survey respondents attributed the tough property market to natural catastrophe losses from Hurricanes Ian and Nicole and severe convective storms in the Midwest. Commercial property claims also spiked in Q4, up from 56% of respondents seeing claims in Q3 to 71% in Q4. Flood claims and business interruption claims also rose, up from 31% to 44% and 15% to 26%, respectively.
Cyber insurance pricing slowed significantly, down to an average 15% increase compared to 20% in Q3, 26.8% in Q2 2022, and well below the line’s peak at 34.3% in Q4 2021.
“One possible factor behind the recent smaller increases is reduced cyber claims activity. According to survey results, the number of respondents reporting an increase in cyber claims has fallen almost 20% from the previous quarter, and nearly 30% from the beginning of the year,” CIAB noted, adding, “It could be that after several quarters of sharp increases, premiums may have reached or may be about to reach a more appropriate level for the potential losses, which can be sizable.”
That said, underwriters have maintained their strict requirements for cyber buyers, with brokers reporting increases in the number of questions asked around cyber hygiene. “The detail required in the applications has become very cumbersome for clients to complete,” said one Northeast broker, while another said insurers “held to requirements of insureds deploying MFA, implementing patching strategies, etc.”