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General liability and excess casualty insurance policies may see premiums accelerate upward in the remaining months of 2024. That’s the broad consensus from insurance carriers’ Q1 earnings calls.
What’s new: P&C executives were open about the potential for general liability insurance rate hikes during earning calls. Rate increases had slowed to single digits in 2023, subsiding from the hikes during the peak hard market in 2020.
While property insurance dominated the conversation last year, issues around adequately estimating claim payouts, especially for liability insurance, took center stage later in the year.
What they’re saying: Here’s a sampling from insurance executives on casualty rates.
- Everest CEO Juan Andrade: “We continue to see rate acceleration across casualty lines excluding financial lines. This was most pronounced in commercial auto liability, general liability and excess casualty lines. The rate increases in these three lines average midteens overall.”
- RLI COO Jennifer Klobnak: “In the Q1 2024, overall casualty rate change was 7%, and in the Q4 2023 was 5%. So we’re seeing a little bit more rate, a lot of mix change with personal umbrella growing and getting a 13% rate increase.”
- Arch CEO Marc Grandisson: “We may have some respite in terms of price increase middle of last year [2023]. But I think that the development of the prior year, as we all know, has created a little bit more uncertainties, and inflation is not ebbing.”
What’s driving the news: One of the main reasons rate increases have persisted is so-called “social inflation.”
Social inflation describes how insurers’ claims costs increase above general economic inflation. It encompasses a variety of phenomena, from sentiment toward corporations to the broader adoption of third-party litigation funding.
According to research firm Marathon Strategies, nuclear verdicts – or jury awards of more than $10 million – hit a 15-year high of 89 in 2023.
- Of the 89, 27 cases resulted in plaintiffs’ awards of more than $100 million, the highest number since 2009.
A new AM Best report found social inflation most impacted commercial auto, professional liability, product liability, and directors and officers liability insurance.
Meanwhile, economic inflation saw a Q1 uptick, forcing the Federal Reserve to keep borrowing costs at a 23-year high.
What we’re watching: General liability premiums may not surge dramatically. However, insurance buyers should expect upward pressure over the next few quarters.
