As many of our clients and team members personally experienced, the trend of more severe and frequent catastrophic events continues to occur across the United States. 2018 was the fourth-highest annual catastrophe loss year on record with insured losses of $80 billion. This follows a record-breaking 2017, where insured catastrophe losses reached $140 billion.

In response to these record losses, we anticipated a tightening market to develop last year. While we did see average renewal pricing increase by roughly 2%, we did not see the broad market correction that many anticipated. Fueled by record industry surplus levels and a stronger economy, the market resisted any broad market correction. Instead, underwriters focused their price increases toward lower-performing risk profiles and certain lines of coverage. As we look ahead into 2019, we expect a tighter marketplace with these prevailing themes:

  1. Hardening D&O marketplace
  2. Gradual tightening in the Property marketplace
  3. Ups and downs in the Casualty marketplace
  4. More competition and coverage evolvement in the Cyber Liability marketplace



CAT Property +5% to +15%*
General Property 2% to 10%
General Liability Flat to 5%
Umbrella 2% to 10%
Management Liability
0% to +10%;
Management Liability 
+5% to +15%
Auto +5% to +15%
Workers Compensation -10 to +0%
*CAT Property defined as a location portfolio with exposure to catastrophic loss (i.e., California EQ, Flood, Florida/Texas/Gulf Coast—wind/hail, the Carolinas, etc.)

Management Liability: Facing stiff headwinds

Rates in the D&O market continued to increase in 2018, albeit at different levels between public and private companies.

The public company D&O market has experienced the stiffest headwinds. Higher-thanexpected claim volume, larger settlements and rising rates of litigation have carriers responding with demands for higher premiums in order to stay competitive. Phil Norton, senior managing director of Gallagher’s Management Liability practice, states, “Leading carriers are breaking out from a concentration of flat renewals that have been quite typical over the last two years. We saw a much bigger shift already underway in Q4 2018, and this will continue throughout 2019.” As a whole, carriers are seeking 5–15% increases on primary D&O with almost the same demands from lower excess policies.

The private company D&O market, on the other hand, remains fairly competitive with no shortage of capacity for well-performing risks. 2018 saw mainly flat to slight increases in renewal pricing compared to years past, where flat to slight decreases were the norm. We expect this trend to continue with flat to 5% increases for most, but with double-digit increases for the larger private companies.

Commercial Property: Lean pricing leading to modest increases

In 2018, the broader property marketplace saw modest rate increases for the first time in years. After years of decreases and flat pricing, even well-performing accounts were priced so lean it would have been difficult for underwriters to sustain current pricing levels.

As the graphic below clearly illustrates, there has been a rise in severe weather-related events. In 2017 alone, there were 16 weather-related events that exceeded $1 billion dollars. Even more notable than the number of billion-dollar events was the cumulative cost of these events—over $140 billion dollars in insured losses for the calendar year of 2017, a new annual U.S. record.1

Loss Events in the U.S. 1980-2018
(Number of relevant events by peril)

  Geophysical events             
(Earthquake, tsunami, volcanic activity)
Source: ©2018 Munich Re, Geo Rishs Research, NatCatSERVICE. As of January 2018.
 Meteorological events
(Tropical storm, extratropical storm, convective storm, local storm)
 Hydrological events
(Flood, mass movement)
 Climatological events
(Extreme temperature, drought, forest fire)

Accounted events have caused at least one fatality and/or produced normalized losses > US $100,000, US $300,000, US $1m or US $3m (depending on the assigned World Bank income group of the affected country).

Despite the record losses delivered in 2017, rate increases did not develop in 2018 as anticipated. Instead, capacity remained abundant and the majority of our clients experienced stable renewal pricing. Those with favorable loss history or low exposure to catastrophic loss events saw modest rate increases in the single digits. The greatest increases were delivered to catastrophe-exposed risks and large layered and shared programs that suffered severe storm losses and/or had a high degree of attritional losses.

This trend changed in the first quarter of 2019, with most property renewals experiencing more significant rate increases and changes in terms and conditions. Portfolios with limited CAT exposures and low attritional losses received rate increases in the mid-single-digit range. CAT-exposed portfolios with moderate attritional losses saw rate increases in the 8–15% range. Insureds with significant CAT exposure, CAT losses and/or operating in difficult classes of business (Multifamily, Dealer Open Lot, Hospitality, etc.) incurred greater rate movement. Program business for Multifamily and Hospitality experienced a significant rate increase in excess of those clients with their own dedicated program. In addition, markets are looking to reduce attritional losses from the books with increased deductibles for all risk, and in some cases, wind/hail/convective storm in the Midwest.

Lloyd’s of London, which has long been a key source for E&S capacity, has been tightening for 12+ months. Lloyd’s reported a £1 billion (US $1.3 billion) loss for 2018. Disaster-related claims from U.S. hurricanes and wildfires coupled with Typhoon Jebi in Japan cost Lloyd’s £2.9 billion (US $3.8 billion) in 2018, which is significantly higher than the long-term average of £1.9 billion (US $1.3 billion). Business plans for 2019 have been restricted in an attempt to correct profitability. Each syndicate is looking for substantial rate across the book and are willing to shed low-performing portfolios. They are particularly focused on accounts with any loss frequency, valuation issues, CAT exposures and large underperforming program business.

This year, underwriters will continue to focus on pricing, adequate valuation, data quality, and terms and conditions. Those with attritional losses may need to consider increasing deductibles. Certain domestic carriers are making significant changes to renewal structures and, as a result, underwriters are flooded with submissions. Thus, it is important to start the renewal process as early as possible. Rate increases described above are expected to continue for the next quarter.

Casualty: Ups and downs in the marketplace

Workers Compensation continues to be extremely competitive. Consider that in 2013, 74% of the NCCI states filed for a rate increase, as compared to 2018, where only one state filed for a rate increase (Louisiana). The number of accidents in the workplace continues to decline each year. Experts attribute much of that decline to more robust safety cultures, as well as an overall shift in the economy from hazardous jobs to service jobs. Desirable and well- performing risks can expect to see flat to decreased pricing on renewals in 2019.

General Liability loss costs have been rising as the overall legal landscape continues to change in the U.S. The primary change in the legal landscape has been an increase in the frequency of large judgments with punitive damages being the driving force (an increase in litigation financing, an empowered plaintiff bar and overall juror skepticism toward large corporations). Even though loss costs have been rising, there still remains plenty of capacity. We forecast pricing to be fairly stable—flat to single-digit rate increases on desirable and well-performing risks.

Auto Liability is consistently seeing sizable rate increases regardless of risk profile. While distracted driving continues to be a growing problem, also contributing to the increase in auto premiums is the improving economy—more people are driving more frequently and/or for longer distances. Additionally, loss costs continue to increase. The amount of technology added to vehicles in recent years has resulted in increased repair and maintenance costs. A fairly simple repair now often involves replacing cameras, sensors and other onboard technology. 

Clients with large fleets have experienced higher than average Auto Liability rate increases, which is also causing higher pricing for Umbrella coverage. Auto has certainly been the driving force behind a tightening Umbrella marketplace, but now we are starting to see the capacity shrink for accounts with tougher GL exposures. Carriers are limiting the amount of Umbrella limits they are putting up for certain classes of businesses and, in some cases, they are exiting the market on those businesses. Finally, we’re seeing a recurring theme emerging with carriers seeking an increase in attachment points for GL and Auto. While in previous years this applied to larger firms and those with substantial fleets, the market has been pushing for higher attachment points across the board.

Cyber Liability

Cyberattacks continue to be a growing concern with several high-profile network intrusions reported in recent months. 

While we continue to advise clients on cyberrisk posed by increasingly sophisticated and often well-funded threat actors, we are also focusing on a heightened regulatory risk that arises in the immediate aftermath of an attack. Regulatory investigations led by state attorneys general, the SEC and European regulators are now expected after a significant data breach occurs. The increased scrutiny by regulators at the state, federal and international level often focus far beyond the failure to protect personally identifiable information.

Organizations will be required to comply with increased standards to limit big data collection practices while conforming to a broadened definition of how regulators define what constitutes personally identifiable information. Noncompliance can lead to significant fines and reputational harm as these penalties become publicized. 

Despite this rising threat, the number of carriers offering cyber insurance continues to rise, leading to increased competition and a favorable rate environment for smaller to midsize clients.

For larger clients (more than $1 billion sales), the market is slightly more challenging, specifically in excess layers where carriers have been left with several recent large losses that have not been funded.


Although 2018 was the fourth-highest annual catastrophe loss year on record with insured losses of $80 billion, the market did not develop as we anticipated. Average renewal pricing increased by approximately 2%, but a broader segment of the market (i.e., property) consistently experienced rate increases for the first time in years. However, there is no shortage of insurance companies looking for clients with a desirable risk profile. The marketplace remains well capitalized and will remain competitive for the vast majority of clients. Severe weather-related events continue to rise, and the weather systems that develop during hurricane and wildfire season will determine how well the market ultimately performs in 2019.


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