US pricing: Increases continue at slower pace

Insurance pricing in the second quarter of 2021 in the US increased 12%, year-over-year. Although pricing continued to increase, the rate of increase slowed for the third consecutive quarter.

Property insurance pricing increased by 9%, the fifteenth consecutive quarter of increase.

• Property insurance pricing generally decelerated each month this year; falling from an 18% increase in January to 7% in June.
• Clients with significant losses, poor risk quality, or significant exposure to secondary catastrophe (CAT) perils generally experienced above average increases.
• The market deteriorated for clients heavily exposed to wildfire.
• Insurers continued to scrutinize terms and conditions including deductibles, cyber and communicable disease exclusions, and time element extensions.

04 | US composite insurance pricing change

Casualty insurance pricing in the US increased 6%; excluding workers’ compensation, the increase was 10%.

• Competition among insurers intensified for workers’ compensation.
• Excess liability is expected to experience continued rate pressure throughout 2021, although more moderate than in 2020.

Financial and professional lines pricing increased 25%, driven by cyber and directors and officers (D&O) liability pricing.

• D&O insurance for publicly traded companies increased 15%, which was lower than the 27% increase in the first quarter. 
  • Competition in both primary and excess D&O, with new capacity entering the market, contributed to a downward pricing trend.
  • In both April and May 2021, excess rate increases were less than primary rate increases; a situation last experienced in January 2019.
  • Challenging industry segments include pockets of life science, technology, and specialty retail.

• The size and frequency of excessive fee litigation on defined contribution plans continues to significantly impact the fiduciary market.
• Cyber pricing increased 56% in the quarter — including a 68% increase in June — driven by the frequency and severity of ransomware claims.
  • Ransom payments frequently exceeded $US1 million and the resulting costs for business interruption or data exfiltration increased claim payouts. 
  • Many insurers narrowed coverage for ransomware losses, and tightly managed limit deployment on any one risk, oftentimes capping at $US5 million. 
  • Some insurers significantly changed underwriting strategy while others stopped offering cyber coverage.