As many companies finalize budgets for 2024, many wonder what they can expect for their property & casualty insurance renewals in 2024. The saying “The only constant is change” has rung true over the last decade. We’ve gone through different market cycles on various lines of coverage where carriers have increased rates, decreased capacity, and implemented more stringent underwriting requirements. Over the last few years, we’ve gone through varying levels of hard markets on the excess, auto liability, cyber, D&O, and now property. The most favorable part of the insurance market continues to be workers’ compensation as rates have been stable. We continue to see catastrophic weather events, nuclear verdicts, and reinsurance issues impact the market. The expectations outlined below are generalizations of the market and what carriers will want upon renewal. Contractors could see significantly different results based on their loss experience, class of business, and states where they perform work. Additionally, Group Captive clients can expect their pricing to trend with their loss experience and not mirror market trends.
Workers’ Compensation
Workers’ compensation has continue to have the most favorable pricing when comparing all the casualty lines of business. The stability of the workers’ compensation market can be attributed to the combined ratio being profitable for eight years straight and advancements in medical technology. When it comes to rates, we expect the market to continue with minimal increases for companies with favorable loss history. The biggest change that many contractors will face related to workers’ compensation is the change to how the experience mod is calculated. We have been educating our clients on how the change will impact their experience mod and workers’ compensation premiums in 2024. For a more detailed explanation of the change, click here. Subject to loss experience and major swings in the experience mod, we expect most clients to have low single digit rate increases upon renewal.
Automobile
The industry has seen loss severity increase due to the highly litigious nature of our society, higher than average inflation, and a decrease in human capital within the skilled mechanic field. All these factors have led to the commercial auto insurance industry experiencing underwriting losses in 11 of the last 12 years. These trends have continued throughout 2023 and rate increases have followed. To counteract these underwriting losses carriers are increasing rates and making changes to their underwriting guidelines. We do not expect major swings in the market, but carriers will continue to push for double digit increases on many renewals.
General Liability
The general liability insurance market is also dealing with loss severity increasing due to similar circumstances that are affecting the auto liability market. Nuclear verdicts and general inflationary pressure have continued to increase claim costs in recent years. 5-10% rate increases are what most contractors can expect, but some could see more significant increases based on operations, geographic footprint, or loss experience. Any work in New York, especially the 5 boroughs, will lead to additional underwriting scrutiny in addition to higher rates. Carriers have continued to underwrite exposures to PFAS (per- and polyfluoroalkyl) more closely and add specific exclusions in some cases.
Umbrella/Excess
Nuclear verdicts are more common in the construction industry than many others so contractors were impacted significantly more than most by the hard market over the last few years. Fortunately, our prediction of a more favorable 2023 came to fruition and renewals were more predictable for most. We expect that trend to continue for the most part in 2024 with increases ranging from 8% – 15% for most contractors with favorable loss experience. Reinsurance changes continue to impact certain segments of the market as some carriers continue to pull back capacity or increase rates due to their reinsurance contracts changing. Additionally, carriers are increasingly requiring higher attachment points for companies with large fleets. Even a slight increase in vehicles can trigger a requirement for higher underlying automobile limits. Higher underlying limits can help reduce total costs on an excess tower, so this impact may be minimal for some. While the impact of this has been felt by most over the last several renewals, there will be significant impacts to some renewals in 2024 as carriers pass on costs related to changes in their reinsurance treaties.
Property & Inland Marine
The property market has been hardening for the past few years and it continues to be the most challenging part of the insurance market. In 2023, many carriers began to require double digit valuation increases to property and significant rate increases on top of that. From 2012-2017 the market saw just one catastrophic loss of $10 billion or more. The next five years saw a total of nine events causing $10 billion or more in damage. In the first half of 2023 global insured losses from CAT events totaled $53 billion. This figure came in at 46% above the 21st century average. The reinsurance market responded sharply to this in 2023 with rates increasing and capacity declining. Insurers have been faced with 30-80 percent increases in their reinsurance costs. This problem is compounded by increased values on existing portfolios, so the decreased capacity becomes a concern even when not adding additional buildings to an existing program. Insurance to value will continue to be a focal point but required increases should not be as significant as in 2023. Frame construction, unprotected property, and habitational occupancies are scrutinized more heavily in the current market. We expect high single digit rate increases to continue in 2024 and some renewals will see increases more than 10%. Outside of fixed property, equipment renewals are relatively stable and the frame builders’ risk market continues to see rate increases.
Pollution & Professional
Most contractors have these exposures written on a combined policy and the renewals continue to be stable. New entrants in this space over the last decade have led to ample capacity and most renewal increases are in the single digits. Contractors performing a significant amount of frame construction or those with loss experience are seeing above average increases.
Management Liability
Comprised mostly of Crime, Employment Practices, Fiduciary Liability, and Directors & Officers, management liability saw minimal rate increases in 2023 and we expect that trend to continue in 2024. Claims have been relatively predictable, so carrier pricing has been adequate for the most part. As with the other lines, individual loss experience will impact renewals on these lines of coverage.
Cyber
After challenging renewals in 2021 and 2022, the market stabilized in 2023. Carriers began to reenter the market and increase capacity they were allocating to cyber liability. Increased cyber security controls and decreases in claim severity were the biggest factors in the stabilization of the market. Broad implementation of multifactor authentication and more consistent system backups have led to the decrease in claims, but this market could change quickly if hackers are able to find new ways around security controls. Due to these factors, we can expect to see moderate increases depending on company controls and loss history.
The expectations outlined above are a broad generalization and results may vary significantly based on loss experience, fleet makeup, and other individual characteristics of each company. We start discussions early with underwriters, so our clients aren’t surprised by renewals at the last minute. Fortunately, there is capacity overall as carriers are competitive on new business and incumbents are eager to lock up renewals early for most lines of coverage. Any safety or risk management improvements made during the year can also help with negotiations with underwriters and is important to communicate to underwriters in advance of the renewal.
