Cyber the outlier to E&S professional lines hardening

Buyers are facing higher rates and restrictive terms in the professional lines excess and surplus lines (E&S) market, AmWINS has reported, with the exception being the extremely competitive cyber segment.

In a state of the market report, the wholesale broker said that buyers appear to have come to terms with the higher rates.

“As we wrapped up 2019, we entered the phase where people are accepting the reality of this market,” said David Lewison, senior vice president and national professional lines practice leader for AmWINS Group. “Retailers had an easier time selling rate increases in the second half of the year.”

No end of D&O hikes in sight

For public D&O, last year kicked off with large price increases for IPOs, biotechs and technology businesses. Insurers were pushing for even greater increases by later in the year, and AmWINS sees no let-up in this trend in 2020.

“Markets had been trying to outrun public D&O losses by writing premium, but they’ve been losing too much ground. Ultimately it took a couple of big moves by AIG and others, and landmark cases such as Cyan to move the market,” Lewison said, referring to the US Supreme Court’s Cyan v Beaver County Employees Retirement Fund ruling that securities class actions can be filed concurrently in state and federal courts.

Even the more competitive private D&O market has been pushing for rate increase.

“We are seeing carriers routinely presenting 12-14 percent rate increases, although we are having success pushing back against that,” says Kevin Dorse, executive vice president at AmWINS Brokerage.

Medical professional carrier exodus

Capacity continues to exit the medical professional space making it challenging for retailers to get coverage. AmWINS said a half dozen major carriers have pulled out of the long-term care segment in just over a year.

The report said even accounts of good quality are seeing 30 percent rate increases, while accounts with claims are seeing 40-50 percent increases. This is forcing some facilities to self-insure or participate in a risk retention group.

Skilled nursing and assisted living are seeing a similar pricing trend. “A few years ago, it was easy to obtain 10 or more quotes on a facility. Today you’re lucky if you can get two,” said Don Tejeski, senior vice president at AmWINS Healthcare.

Correctional health care is an extremely tough segment as a result of high claims frequency. Likewise, capacity has constricted for miscellaneous healthcare, including home healthcare and medi-spas, particularly in problem venues such as New York.

AmWINS said accounts are also being challenged to obtain occurrence forms, presenting a significant coverage gap if non-renewed policies are replaced with claims made forms.

The broker said no end of the hardening conditions for long-term care is in sight.

“The bottom line is we are down to a handful of markets, whereas a few years ago there were over a dozen,” said Tejeski. “There are few new carriers that enter this space. Lloyd’s has its own performance management issues, so their current capacity and appetite for problem accounts means that buyers are looking at expensive premiums and high deductibles.”

Aggressive EPL carriers

Employment Practices Liability (EPL) continues to firm in problem jurisdictions such as California, where very few carriers will write wage and hour coverage, as well as in Florida, Illinois and New York.

Carriers are particularly reluctant to offer wage and hour coverage in difficult the classes of restaurants and hospitality.

But the segment is competitive outside those problem areas, with AmWINS expecting it to remain so. “Certain carriers are quite aggressive on EPL coverage,” Dorse said.

Cyber capacity abundant

AmWINS said the cyber liability segment is “saturated with capacity”. This is despite rising concerns among insurers about the threat from ransomware.

“When you go to any cyber conference, you hear that ransomware is hitting every sector,” said Dorse. “Major breaches affect more than just records – they affect access and heighten business interruption risk. Based on this, you would assume the cyber market would harden, but there is just so much capacity and companies are fighting for market share.”

AmWINS forecasts strong underwriting appetite in cyber for the foreseeable future. The broker does not anticipate a change in the direction of rates because carriers are making money through growth of market share.

The report noted that the market also appears to be unconcerned with new regulations around data privacy and security.

“We just don’t see the impact of the regulatory climate on cyber that we do in other sectors,” said Megan North, vice president, AmWINS Group. “The General Data Protection Regulation (GDPR) made headlines briefly, then fell from the news. Now we’re watching the California Consumer Privacy Act (CCPA), along with some other states poised to follow suit, but we don’t expect any market response until at least next year.”