For those in the umbrella and excess liability marketplaces, a shift toward tighter underwriting measures was seen throughout 2019. The second half of the year saw greater capacity restrictions along with higher prices and changes to program structure altogether. Moving forward into 2020 and beyond, insurance brokers looking to succeed in the markets will need to tap into strategic planning and strong relationships with carriers in order to help clients during changes in the markets.
Factors Hitting the Markets
Property lines saw major hits in recent years with limit cutbacks due to major wildfires and hurricanes that swept through the U.S. Policyholders are now seeing higher rates and reduced limits in an evolving excess and umbrella market. Throughout the U.S., there has been a renewed focus on underwriting profitability which has created major challenges around the structure of programs as limits have seen drops and rates have risen sharply.
There are a number of factors that are working together to produce the changes in the markets. Excess and umbrella coverages were underpriced year over year until the beginning of the last decade. This was the case even as health care costs were on the rise and societal challenges such as gun control and wildfires became more prevalent.
Furthermore, constant updates to technology and science, especially in the consumer settings, have enabled the development of tools used to evaluate losses and understand their causes.
Capacity Pressure on the Rise
Premiums have been on the rise and have presented a challenge for brokers and policyholders alike. As these rates have risen, capacity limits have continuously gotten smaller. The market changes have not only affected larger policyholders but mid-market accounts as well.
Some insurers have chosen to leave the market altogether while new carriers are reluctant to enter the markets at all. The fallout from this decision has caused limits to keep dropping and driving up attachment points. In the commercial field, lead umbrella limits would hover between $10-$15 million. Now, today’s markets are seeing $25 million lead limits.
Moving forward in 2020, the commercial auto sector will continue to be a challenging area. Policyholders with a mid-size auto fleet may only be able to renew up to one-half of their limits in their previous program. This has caused a requirement of several carriers to reach previous limits. Insurance brokers in the field should expect more challenges in assembling the umbrella if the auto premium is bigger than the general liability.
And while limits are dropping, market capacity is still wide open. It’s just that carriers are leaning toward selling that capacity in smaller portions in an effort to use capital responsibly. This is making it difficult for policyholders to maintain a program and its structures they’ve used in the past.
About Genesee General
At Genesee, we strive to provide quality insurance solutions for the Commercial E & S sector, and we can help with your small, middle market and large excess and umbrella accounts. Our longstanding expertise has allowed us to successfully serve your clients for over three decades. Our specialized products include coverages for Transportation, Garage, P & C, Professional, Brokerage Property, Specialty Programs and many more. For more information about our products, we invite you to contact us today at (800) 282-8755.