Hard commercial market begins to moderate; expanded capacity could bring stability in 2022
Willis Towers Watson predicts a gradual softening of North American commercial insurance prices in 2022, according to their 2022 Insurance Marketplace Realities report. After years of steep increases, the marketplace is correcting itself, driven by the laws of supply and demand. However, certain sectors, particularly cyber liability and fiduciary liability, are expected to see significant rate hikes. While the overall cost of insurance may rise, buyers can anticipate less severe increases. This reflects improved market conditions for most, although higher-hazard lines will remain challenging.
- Gradual softening of commercial insurance prices in 2022.
- Improved market conditions expected for most sectors.
- Enhanced tools for risk analysis and presentation for insurance buyers.
- Cyber liability and fiduciary liability insurance to experience steep rate increases.
- Two-tiered marketplace persists, making conditions tougher for less attractive risks.
Insurer pursuit of market share suggests confidence in rate adequacy and stronger returns on capital, Willis Towers Watson’s latest Insurance Marketplace Realities predicts
ARLINGTON, Va., Nov. 16, 2021 (GLOBE NEWSWIRE) -- North American commercial insurance prices are expected to soften gradually, bringing a welcome deceleration in premium rate increases and further stability in 2022, according to Willis Towers Watson’s (NASDAQ: WLTW) 2022 Insurance Marketplace Realities report.
After several annual cycles with steep, often relentless increases, the marketplace has taken significant steps toward “correcting” itself, said Willis Towers Watson, a leading global advisory, broking and solutions company.
The report, published today, points to the forces that led to the hard market, including systemic rises in risk from heightened catastrophe losses likely driven by climate change, “social inflation” and rising exposures in areas ranging from cyber to liability, which have not gone away.
While Willis Towers Watson predicts market moderation, cyber liability and fiduciary liability insurance are two exceptions to the general trend. Rates within these lines have been going up steeply, and in the case of cyber, the increases the report is forecasting for 2022 are even steeper.
“For the most part, we are moving toward stability as we watch the workings of a simple economic law — supply and demand,” said Jon Drummond, senior editor, Insurance Marketplace Realities and head of Broking, North America at Willis Towers Watson. “That does not mean, however, that this is a simple marketplace. The two-tiered marketplace we highlighted in our last issue remains a reality in many lines of business; conditions are better for better risks and tougher — sometimes quite a bit tougher — for less attractive risks.”
The report points out that the risk manager’s job of distinguishing his or her organization’s risks in the marketplace is more demanding than ever. More data and better data are required and expected, and the information must be presented in a way that is clear and compelling. Fortunately for insurance buyers, the tools to help analyze and present that data are getting better, too.
Another aspect of the new insurance marketplace has been brought on by COVID-19. “We’ve discovered we can do our work remotely, most of it anyway, and that the virtual world has some advantages,” said Drummond. “It’s easier to bring people together for meetings, and for insurance buyers, bringing the C-suite to the negotiating table can have noticeably positive effects. Those meetings are also easier to organize virtually with underwriters sitting across the world and in venues some risk managers may never have had the opportunity to visit,” he added. “Employees within the industry — be they underwriters, brokers or risk managers — are enjoying the benefits associated with a commute to the living room versus the commute to the office.”
Willis Towers Watson makes reference to talent development and how the work-from-home environment will challenge leadership to find new ways to educate employees. “How is the industry responding to talent development in this environment? Today’s younger generation certainly faces a different world from what many grew up with in the industry,” explained Drummond.
The report concludes that the cost of insurance is still going up — for the near term. Most buyers will be paying more, but marketplace results should be less painful. The two-tiered market, which has always been a reality to some degree, is still in effect in many places, but the downside of being in the higher-hazard tier is not as bad.
“For better or worse, our industry will continue to move with the laws of supply and demand,” said Drummond. “If supply continues to come back as it has in the second and third quarters of 2021, we could see rate decreases commence as early as the second quarter of 2022. This will not be a wholesale development across all lines, and distressed lines of business, most notably cyber, will remain challenged well into 2022.”
Key price predictions for 2022
| Property | |
| Non-challenged occupancies | + |
| Challenged occupancies | + |
| Domestic casualty | |
| General liability | + |
| Umbrella (high hazard) | + |
| Excess (high hazard) | + |
| Workers compensation | – |
| Auto | + |
| International | Flat |
| Executive risks | |
| Directors’ and officers’ public company (primary) | Flat to + |
| Directors’ and officers’ private/not-for-profit (overall) | + |
| Errors and omissions (large law firms) | + |
| Employment practices liability (primary) | + |
| Fiduciary (financial institutions) | + |
| Cyber | |
| + | |
| Political risk | |
| Most risks | Flat to + |
| Terrorism and political violence | |
| Terrorism and sabotage | – |
| Political violence | + |
The Insurance Marketplace Realities series is published in the fall and updated every spring. A copy of the full report can be accessed on the Willis Towers Watson website along with a video message from Jon Drummond.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
Media contact
Ileana Feoli: +1 212 309 5504
ileana.feoli@willistowerswatson.com
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