The decades-long trend of falling property insurance rates — and complacent buyers — is ending, according to the Insurance Marketplace Realities 2019 Spring Update from Willis Towers Watson (WTW). The report serves as a guide for North American insurance buyers preparing for upcoming insurance program renewals. For decades, carriers have been warning that undisciplined rate setting was unsustainable, yet pricing for certain lines (particularly property & casualty) have kept falling, in spite of accumulating catastrophic losses and the pressure of alternative capital and traditional capital competing for market share. Finally, however, that downward trend appears to be changing for the rest of this year. WTW's report finds that, almost universally, insurers are taking steps to return to underwriting profitability across lines of business and geographies. Despite plentiful capital, insurers are being more disciplined in setting prices. This is most evident in double-digit price hikes for areas where losses have been largest — such as wind exposures in hurricane-prone areas and directors and officers liability (D&O) for public companies — but rate spikes are not limited to these large loss areas. In his introduction to the report, Joe Peiser, head of Broking, North America, WTW, says: "As we head into the second quarter of 2019, increased discipline in the market is apparent. Insurers are taking steps to return to underwriting profitability and we are seeing price firming almost universally. While it may be more prominent in some lines of business, the firming trend applies even in more benign areas." This shift in insurer attitude means tightened pricing and underwriting guidelines will be noticeable across different lines. Supply-side pressures are also contributing to a more challenging marketplace for the remainder of 2019. WTW's research shows only two lines of business are predicted to ease, and 10 have been revised further upward since its October 2018 issue. |

Property decisively up

Property market conditions have recently exhibited a decided firming, and buyers can expect across-the-board increases throughout 2019. Capital remains buoyant and capacity abundant with the exception of accounts with significant catastrophic exposures or losses; deployed capacity has tightened significantly on these renewals. Tightened underwriting guidelines may restrict many coverage terms previously offered to buyers. In addition, sub-limits and deductibles are being looked at closely. Because negotiations and proposals are taking additional time, buyers should consult early and often with property advisors. |

Casualty rate pressure increasing

Deteriorating loss trends have affected underwriter profitability in the commercial liability marketplace, including general liability, auto, and umbrella. The umbrella liability marketplace is experiencing notable disruption, with insurance carriers requiring changes to program structures and pushing rate increases. The use of short-limit lead umbrella policies is becoming more prevalent, as risk managers look to leverage the global marketplace to generate the necessary capacity for their accounts. Auto liability continues to be unprofitable for personal and commercial insurers. Escalating loss costs are driving rate increases for the third consecutive year. The one bright spot continues to be workers' compensation, where pricing remains largely favorable for buyers. |

D&O increases likely

WTW's report predicts that few D&O placements will receive pricing reductions. Increases are likely, but will usually be manageable. Leading insurers are being more conservative in deploying capacity in the face of profitability challenges. |

Cyber capacity continues to grow

Most global cyber renewals for both primary and excess cover are averaging single-digit increases. Pricing and deductible guidelines have been tightened for companies that have not addressed vulnerabilities, so their increases may be higher. For organizations that can demonstrate increased levels of security and internal policy controls, underwriters have offered decreases. Buyers can also differentiate themselves if they are developing holistic approaches to cyber risk across human capital and technology. The slideshow above illustrates key price predictions for the remainder of 2019. |

Insurance marketplace realities

As rates rise and terms tighten, a good relationship between buyer and insurer becomes more critical than ever. "Insurance buyers should expect their insurance advisor to be disciplined and proactive, assisting with analytics, building relationships, and driving the risk differentiation that underwriters seek," says Peiser. "That partnership between the risk manager and the risk adviser has never been more vital for deriving the greatest value in the global insurance marketplace and for helping a risk manager's organization grow and thrive." See also: |

• Intensifying weather events are driving higher losses for insurers
• Most insurance lines see Q1 2019 renewal rate increase, according to IVANS
• Four trends shaping insurance in 2019