After years of significant rate increases, which spiked into double digits for some classes of business, rates have stabilized, according to market executives. “The majority of risks can expect pretty favorable renewals,” Aronson says.

Rates should be flat to no more than a couple of percentage points higher for most buyers. Insurers even are imposing lower rate increases on policyholders with significant Product Liability risks, notes one executive who did not want to be identified.

In addition, “there definitely is a lot of interest in new business” when a Product Liability account has a clean loss record and strong loss-prevention controls in place, Aronson says.

Problematic accounts, however, should expect significant rate increases, although “we have probably seen the highest increases already” of double digits, Aronson says. Those risks should anticipate high single-digit rate hikes, he says.

But no matter how attractive an account, insurers will be underwriting it more closely, market executives say.

Underwriters are looking at buyers' controls, contracts and claims management practices, explains Jeff Mazie, a Los Angeles-based senior vice president and unit manager for The Lockton Cos. “I think [underwriter scrutiny] is a little deeper, not necessarily tougher,” to understand the risk better, he observes.

That, in turn, leads to more purchase options for the buyer, depending on its cash flow and loss-mitigation strategy, Mazie says. For example, an account might be willing to pay a higher premium for greater coverage when assuming a low retention and securing coverage of defense costs. Or the account might want to reduce its costs by taking a high retention and foregoing coverage for defense costs.

“None of this is new, but everyone is looking at it more than in the past,” Mazie says.

Capacity

The softer rates in Product Liability result from factors beyond brokers pressing for better deals, according to market executives. Contributing to the factors is the market's achievement of rate adequacy.

“Product Liability insurers are saying they have a good rate now,” says Lorraine Seib, the New York-based president of excess casualty at XL Group.

Another factor spurring completion is an abundance of capacity for good risks, Mazie says. “There's too much capacity in the marketplace,” Seib agrees, while also noting that XL insures Fortune as well as small companies that manufacture a wide variety of products.

A big company with significant risk, but good claims experience, could buy $1 billion or more of limits. But for insurance buyers with dicey risk, that capacity typically is split among onshore and offshore underwriters. Onshore insurers have tighter policy forms and typically do not offer significant limits to companies with high-hazard risks, while offshore insurers specialize in that business, Seib notes.

Pamela F. Ferrandino, New York-based national casualty practice leader, placement, at Willis North America, estimates that the market has sufficient capacity for 60%-80% of buyers.

But for the largest accounts, the available limits of $500 million to $1 billion are not “sufficiently meaningful.”

Coverage Developments

If a cyber attack causes a client's product to malfunction, then policyholders want the resulting bodily injury or property damage losses covered, Seib says.

But despite softening market conditions, insurers—as they are in other lines of coverage—are beginning to add exclusions designed to bar coverage for losses related to cyber risk, Seib notes.

“So, it's evolving,” she says. “It's something that client should be thinking about with their brokers—the wording that should be included in their Product Liability policy.”

Meanwhile, Mazie says he is seeing a growing number of clients dusting off and using an established Product Liability product as part of their mergers and acquisitions. The acquiring party wants the seller to purchase a discontinued-product policy that shields the buyer from liability if a claim were filed over an out-of-production item after the merger or acquisition has been completed.

The policies usually provide limits of $25 million to $50 million and years of protection to whichever party in the M&A transaction or that has agreed to retain liability for the discontinued product.