With commercial umbrella rates going up, independent agents have an opportunity to show clients how to get their money’s worth and to explain why suitable protection is needed.
Dan Gaynor, vice president and head of commercial lines with The Main Street America Group, points to two reasons why commercial umbrella and excess casualty are needed: the litigious climate and the risk of catastrophic events that can cause extensive damage, such as the Boston Marathon bombing that occurred in a central business district.
The size of rate increases varies, depending on geographic location and class of business, but the trend has been “mid to high single-digit percentage point increase[s],” says Brian Lineberger, president of Admiral Risk Insurance Services.
“Standard markets are making adjustments on an account-by-account basis to correct pricing, limits or terms,” he adds. “We expect to see more of this with the recent storm activity and projections for storms moving forward.”
Diane Amodeo, XL Group’s chief underwriting officer for excess casualty, says she’s seeing slightly higher increases.
“We have seen carriers pricing increases in the lead umbrella segment…in the range of 5%-10%, and that reflects carrier response to loss development,” Amodeo says.
And pricing isn’t the only umbrella element on the upswing, she notes.
“We have also seen carriers mandating increases in attachment points for auto liability,” Amodeo says. As an example, she cites an SIR figure of $10 million for large trucking fleets.
In addition, CRC|Crump’s Josh Chassman, senior vice president and casualty broker, says he’s “seeing increases of 4[%] and 6[%] and 7%, not increases in the double digits.”
Meanwhile, Jeff Barnes, assistant vice president–commercial lines administration at The Cincinnati Insurance Companies, offers a tip when it comes to commercial umbrella pricing: “The percentage of [an] increase typically mirrors the primary general liability and auto percentage increases.”
On the Horizon
XL Group and other players might hone in on the upper-middle market. Firms with between $50 million and $1 billion in revenues are “our biggest growth opportunity,” Amodeo says.
XL expands its underwriting appetite by providing upper-middle market businesses with umbrella protection of as much as $25 million and excess liability of up to $50 million.
Lorraine Seib, president of XL Group’s Global Excess Liability, characterizes coverage as “an important lifeline for any size business.”
“Businesses of all sizes are vulnerable to severe mishaps,” she says. “A costly court settlement, a devastating auto accident in a company vehicle [or] an explosion at a manufacturing plant can quickly eat away at a business’ general liability coverage and severely impact a business’ ability to survive.”
With the market beginning to turn, standard markets have greater opportunity to be more selective. If that’s the case, Chassman tells retailers: “Be nice to [wholesalers], because you’re going to need them.”
“The admitted markets, in the past, maybe have been willing to write larger lines, say, $25 million, and now they’re either walking away or shortening the amount they offer,” he adds.
Chassman also predicts: “If the market continues to firm up, then [that] could create opportunities for surplus lines markets to offer more stand-alone umbrella and excess.”
Ron Lent is IA markets editor.