US commercial rates starting to normalise
But WTW warns of continued spike in cyber rates, bringing headaches for commercial buyers
Amid a steady deceleration of rate increases, 2022 is starting to demonstrate a shift toward normalcy for the US commercial insurance market, according to WTW.
Buyers are still seeing rate increases; however, many of those increases are now dropping to single digits and even flat renewals, WTW said in its 2022 Marketplace Realities Report, Spring Update.
While the market is appearing to stabilise for commercial rates, it is nowhere near a soft market, WTW business leaders said. Leaders in 79% of WTW’s commercial business lines forecast continued rate increases, however these are slowing significantly.
However, WTW said that the standout across the industry is the cyber market, where buyers are seeing higher increases than just a few months ago. Rate increases as high as 100% to 200% are commonplace in the cyberinsurance market at the moment, making cyber a very difficult market for commercial buyers to navigate.
According to the WTW report, factors affecting the cyber market include overall claims activity, evolving regulations and an ever-growing complicated risk environment are collectively providing headwinds to slowing cyber rate increases.
In an increasingly challenging global environment with military conflict in Europe, continued supply chain backlogs, accelerating inflation and a more expensive borrowing landscape with the Federal Reserve’s recent rate increase, markets will likely see uncertainty and volatility, said WTW.
Jon Drummond, senior editor, Insurance Marketplace Realities, and head of Broking North America, said: “While we continue to see rate increases across most lines of business, the silver lining is that the increases are decelerating and beginning to stabilise.”
The report concluded: “A confluence of factors is suggesting that higher interest rates and rising inflation won’t be transitory and instead will be a part of our economic environment for a while. Commercial buyers that are proactive with their risk planning strategy will be best positioned to absorb the increases, rising interest rates and record-breaking inflation.”