What to watch in the 2023 commercial P&C market
A recent report from USI explores how trends for commercial insurance lines could shift in the year ahead.
Insurers are expected to pay out billions of dollars in losses from severe weather events that struck the U.S. in 2022. Hurricane Ian, which made landfall in Florida in September, caused an estimated $65 billion in losses alone, making it the second-largest insured loss recorded, behind Hurricane Katrina. These increasingly impactful weather losses, as well as things like continuing supply chain issues and a larger focus on ESG risks, will affect how the insurance market is forced to shift in the coming year.
Recently, insurance brokerage and consulting firm USI released its 2023 Commercial P&C Market Outlook, which outlines trends and challenges commercial P&C insurers should keep an eye on.
Here is a look at the some of the trends USI predicts for the 2023 commercial P&C market.
Property
Property insurers are experiencing an increase in water damage claims – both in terms of frequency and severity. These claims are often caused by things like HVAC equipment, leaky sprinkler systems or pipes that have broken due to freezing. According to USI’s report, 2021 winter storm Uri resulted in 500,000 water damage claims totaling over $15 billion in insured losses in Texas. Increasing water claims have led insurers to make changes to keep up financially, including actions like adding safeguards for vacant buildings, using policy forms with exclusions or limitations for water leaks and increasing deductibles for these perils.
General/ products liability
Rate increases for general and products liability insurance are expected to be less sharp (between 5% and 10%) than other casualty lines. This is due in part to more risk falling on insureds in the form of higher deductibles or self-insured retentions (SIRs), but also to the fact that more insurers are achieving rate adequacy for these lines.
Umbrella/excess liability
USI predicts umbrella/excess liability insurance rates will remain volatile in 2023. Despite rates that could rise somewhere between 5% and 15% in the first half of the year, they report these increases have decelerated quarter-over-quarter thanks to an increasing number of insurers experiencing rate adequacy and profitability.
Workers’ compensation
As of the end of 2021, workers’ compensation redundancies topped $15 billion, but climbing medical costs and job shifting, among other factors, will put pressure on rates in 2023. USI predicts an overall “competitive premium environment,” but that rate reductions will be less aggressive than in past years in well-performing states.