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Property & Casualty Market Overview: Q2 2020

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The Property & Casualty (P&C) Insurance marketplace in Q2 2020 will find its way into the history books as having been the most rapid changing in a generation. Leading up to April 1, 2020 was an unprecedented global event that was unravelling by the minute having commenced only a few weeks earlier in March 2020. Further, an already firming marketplace developed throughout 2019 that continued its trajectory into 2020, prior to the unparalleled events developing around COVID-19, represented in many respects the perfect storm. Although rates were increasing and Carriers were becoming much more selective in underwriting and risk selection, it was primarily limited to certain lines of business, industries and account sizes. That changed overnight in early March setting the stage for an intense and rapidly developing marketplace with no limitations on account size, location or line of business notwithstanding Workers’ Compensation.

This overview is intended to provide a holistic Marketplace outlook from a rating, capacity, terms, and conditions perspective. We will touch upon various factors that affected the market, including new capital entrants, emerging exposures (beyond the pandemic), industry consolidation, evolving Carrier distribution strategies and more. The global pandemic, one of the many risks throttling the rapid pace, is deserving of its own analysis, and therefore will be reviewed only briefly.


Most markets have plentiful capacity with strong balance sheets and sufficient available capital in the event it is needed. However, the deployment of capacity on single risks is strategically being underwritten within certain lines of business accompanied by significant tightening, namely Umbrella/Excess Liability, Auto Liability, Directors & Officers Liability and Property for any risks that are Catastrophe (CAT) exposed. This has resulted in an increase in the number of Insurers required to fulfill the needed limit and restructuring placements through development of layering and quota-sharing. What used to be a single Carrier placement is now in many instances through several, in order to meet the required limit.


Notwithstanding tightening of capacity, rate too has risen on most lines of business irrespective of insured loss history, location of risk or coverage breadth. Prior to Q2 rate increase affecting the small to medium enterprise (SME) sector had been lagging, however that too started to change late 2019 and accelerated in the first half of 2020. Rate increases in middle-market and large accounts were well established and underway long before the sudden onset of COVID-19 with the pandemic exacerbating an already volatile marketplace. It should be noted that larger accounts are experiencing rate increases far greater than SME or middle-market, however accounts of that size generally have greater latitude to adjust retained risk to offset sharp premium increases.


T&C often rolled over from year to year using standard policy language, however are now increasingly under pressure as Insurers look to limit their exposure and create contract certainty. The recent spotlight placed on Business Interruption (BI) under first party or Property policies has underscored the importance of contract certainty and policy language that is clear and easy to understand. Further, some Carriers fear elements of unintended coverage under various Liability policies and, as such, are introducing pandemic and communicable disease exclusions specifically created as a result of our current outbreak. Additionally, special attention should be applied to claim handling, adjuster selection and related responsibilities and obligations in an environment with increasing layered and shared programs or utilization of buffer layers to meet client limit needs when Carriers are retrenching. Of course, traditional Umbrella attachment points are creeping ever higher with a $2mm underlying General and Auto liability limit becoming the norm, not the exception.

Also developing in Q2 has been U.S. property insurer’s response to the widespread riots and looting with some stark divergence developing among them. Some are pursuing the approach of adding in strike, riot & civil commotion (SRCC) exclusions at renewal, while others are resisting firmly and taking a more nuanced approach. Early estimates of Property Damage are still unavailable but based on early Q2 earnings calls of Insurers, the $25mm threshold to qualify as a true catastrophe will be dwarfed.


There are no shortage of announcements in Q2 regarding start-ups, new facilities, expanded appetites and returns to strategic focus.

Start Ups:

  • Convex Insurance: started in 2019 by Steve Catlin, formerly with AXA XL, following the sale of his first business to them, is back at it along with longtime cohort Paul Brand. Their focus is on “complex specialty lines of business” and is well underway with operations domestically as well as London and Bermuda.
  • Ed Noonan: former Validus CEO is “identifying a platform for suitable E&S play after receiving multiple P.E. approaches.” In conjunction with Acqualine (lead by former AIG and Marsh CEO Jeff Greenberg) they are in advance talks to buy into StarStone U.S.
  • Dinos Iordaneau: former Arch CEO and Greg Hendrick, former AXA XL CEO are said to be linked with $1B in capital to “focus on opportunities in E&S.”
  • Richard Watson: former Hiscox CEO is aiming to raise $1B.
  • Willis-Re: recently reported capital raising as “the new hot topic” and the most significant recent Covid-related theme in the industry.

Expanded Appetite, Scale Ups and IPO’s:

  • As reported by The Insurer in June, “we think the broad thrust of PE is likely supporting scale-ups with attractive E&S platforms.”
  • Hiscox: midway through Q2 raised $466mm through the sale of 57mm shares which has now resulted in them launching a variable consortium for tougher classes of U.S. General Liability risks such as Trucking, Construction and more with limits as high as $20mm.
  • Corvus: former Lexington, Ironshore CEO Kevin Kelly joins board of Corvus, a provider of commercial P&C to deepen its A.I. driven approach of data & science.
  • Lemonade: IPO oversubscribed on day 1 of trading closing in excess of $69 per share with initial pricing of $29.
  • Hippo: raised almost $400mm with intent to accelerate the company’s expansion, including access to 95% of U.S. homeowner population in 12 months, make hires, invest in technology and support proposed Spinnaker acquisition.

Strategic Focus:

  • AIG Private Client: shedding its middle-market private client business to focus exclusively on the higher end and more desirable personal insurance market.
  • Liberty/Ironshore: announced exclusive distribution through Wholesale brokers only. The opaque line separating E&S and admitted is coming into focus.
  • Lexington: the first to announce distribution through Wholesale only or Specialty retail is in place as of April 1st following a one year transition period.


The quantity, variety and depth of information provided late March through this publication regarding this topic has been unprecedented and often times challenging to stay continuously informed. Every known source was opining; media, rating agencies, insurers, brokers, regulators, lobbyists, industry groups, trade associations and of course every insurance professional of which there are an estimated 2.7mm in the U.S. alone according to Statista. The facts, data and direction were so fluid within the first 30 days it was essential to choose your source and rely on the daily and sometimes more frequent updates for your news. Although the dynamics have changed considerably over the last 90 days and we have found some element of equilibrium, the facts will speak for themselves as we enter new stages of this horrific virus. Cases will be litigated, policies terms & conditions will be tested, new exclusions will emerge along with new products, however to what degree? We will need to wait and see. Will insurers await a federal backstop or develop a solution on their own? Again, time will tell as we are learning of developing public/private scenarios from both Insurers and Retail Brokers alike.

The white-hot topic of the application of BI coverage as found with most common Property policies will be debated and litigated for years to come. While many U.S. lower courts have sided with Insurers thus far, interesting developments out of London show their watchdog agency, the Financial Conduct Authority (FCA), leaning in the opposite direction stating that the interpretations adopted by as many as eight insurers in this regard are “unrealistic” and “impractical.” Back home here in the U.S., several states, namely Rhode Island and California, have introduced legislation that considers retroactive BI coverage relative to the pandemic with the presumption that the virus caused property damage, thereby triggering coverage. The industry will keep close tabs on this topic, both retrospectively related to COVID-19 and prospectively to develop commercially sustainable solutions.

Workplace suits related to COVID-19 are on the rise with a reported 283 filed in federal and state courts through the end of June, however 122 or 43% were filed in June alone. The majority of claims allege discrimination or work-from-home/leave claims, clearly contributing to a more rapid hardening of the Employment Practices Liability Insurance (EPLI) marketplace as covered in greater detail below.

Some specific Carrier facts related to the topic include:

  • QBE: the Australian Insurer raised $815mm from institutional investors reportedly to cover likely losses associated with the pandemic.
  • Chubb: Chubb Ltd. estimates $1.81 billion in net pretax global catastrophe losses for the second quarter, the vast majority of which are COVID-19 related.
  • W.R. Berkley: more than half of WRB Q2 Cat losses of $145 are COVID related totaling $85mm pretax. Their CEO has stressed recently during analysts calls that “the company’s property policies require physical damage for business interruption coverage to be triggered.”



Catastrophe (CAT) exposed risks need to brace for a rough renewal season as July 1st treaty reinsurance renewals were anything but smooth. Barry Whitton, Managing Director, Burns & Wilcox Brokerage, Atlanta, shares “Q2 saw the property marketplace continue further into the challenging hard market cycle with more capacity reductions, increased underwriter discipline on term changes, and double digit increased pricing levels on clean accounts with significant changes on difficult classes or accounts with severe claims activity. This creates the need for layered and quota share programs which unfortunately adds additional premium levels to an already stressed client base.”

General/Product Liability:

Rates have risen more modestly in the high single digits for most insureds across most industries, however that is not to say that certain accounts will not see much greater increases based on their loss history, industry and location as some venues are much more prone to social inflation than others. Further, the changing environment of exposures with manufacturers converting to personal protective equipment (PPE) or distilleries now manufacturing hand sanitizers has created many mid-term changes, not to mention cancellations resulting from shuttered businesses. The U.S. Senate is considering various immunities for business that are contributing to the development of COVID-19—solutions, which will no doubt, have an impact on this line of business.


Similar to CAT Property, Umbrella rates are increasing in double digits while limits are reduced, resulting in the need to layer and quota-share placements to meet the contractual obligations of many Insureds. In reports following the active July 1 renewal date, policyholders were faced with the trifecta of paying significantly more premium for less capacity with restricted terms and conditions. Some estimates suggest that $500mm in capacity has exited the marketplace, a reduction exceeding 40% compared to that available last July 1st. “The excess liability market is harder than it has been since the mid 80’s with Carriers cutting limits and raising premiums. In the Excess & Surplus (E&S) marketplace, very few industries are immune with Insureds buying less limit solely driven by cost,” states David Gross, Managing Director, Burns & Wilcox Brokerage, Dallas.


The entire Auto sector has had its negative outlook continued by A.M. Best as it “continues to face challenges on numerous fronts: nuclear verdicts, distracted driving, inadequate safety precautions by drivers, other frequency and severity challenges.” Premiums are increasing at an alarming rate with capacity being managed very strategically by insurers. “Larger fleets, truckers, tour and bus operators, emergency vehicle fleets as well as any accounts with poor loss experience will experience significant changes from structure with the introduction of buffer layers to meet the demand of Umbrella insurers to increased retentions and rates,” states Tyler Myers, Director, Transportation, Burns & Wilcox, Dallas/Ft. Worth, Texas. Recently released statistics show the trend of underwriting losses in this segment continuing and topping $4B in CY19 making it the worst in a decade.


Similar to other lines, professional is experiencing significant rate increases across the many individual coverages that fall under the banner. David Derigiotis, Corporate Senior Vice President, National Practice Leader, Professional Liability, Burns & Wilcox, stated, “The Professional and Executive liability marketplace continues to experience pockets of hardening, capacity reductions and COVID-19 specific exclusions. Notable segments include D&O, EPLI and medical professional liability.” Additionally, Nationwide E&S President Tom Clark recently shared with us in an interview mid-June that they are seeing PL rates north of 50%. Carriers are grappling with unprecedented leaps and changes in exposure with A.M. Best recently reporting the market will “undergo radical changes” based on 2019 results and the “unprecedented turbulence” created by the COVID-19 pandemic. Evolving exposures due to the surge of recent civil disruption will no doubt have a significant impact on Police Professional Liability secured by most law enforcement agencies and related Municipalities or applicable government entities. Related, some states are now considering legislation mandating individual Police Officers secure coverage for civil lawsuits alleging excessive force and other abuses.

Personal Lines:

“Insurers are carefully considering their portfolios and managing distribution of aggregate limit methodically,” states Bill Gatewood, Corporate Senior Vice President, National Practice Leader, Personal Insurance, Burns & Wilcox. We have seen Carriers sharply increase rate (where needed), exit certain regions and manage distribution through trusted partners who understand the wide array of converging exposures including wildfires, climate change as well as CAT losses ranging from frozen water pipes, to windstorm, flood and earthquake. Homeowners should be vigilant about adhering to underwriting requirements, paying premiums on time and any other means to stay in good graces with Insurers to avoid non-renewals.

The E&S marketplace is well established and prepared to handle what will no doubt be an increase in demand. Burns & Wilcox as the foremost Wholesale broker with a long rich history dating back more than 50 years is uniquely positioned to handle all client needs from large to small, commercial to personal, domestic to global through the many entities under our private family owned businesses. Our expertise and breadth of operations around the globe represent a platform that can assist any client in these unique and unprecedented times as they rely more heavily on the specialty and E&S marketplace. Our commitment and culture are unmatched having been developed over five decades creating a specialty insurance partner developed for the unique times of today. Our experts are working diligently on behalf of our clients to meet the increased demands and customize solutions to ensure disruption is minimized and best in class solutions are provided. We thank you for continued support and commitment during these unprecedented times.

Disclaimer: The above information has been prepared solely for the purpose of sharing general information regarding insurance and business practice management issues. These are just our opinions and are not intended to constitute legal advice or a determination on issues of coverage.

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