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Resources for a Hardening Commercial Umbrella Market

Agents can play a key role in ensuring clients place their risks successfully in a hard commercial umbrella market. Here are four tips to help clients get the coverage they need. 
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In a commercial umbrella market where rates are continuing to rise, capacity is continuing to shrink and there is no end in sight to the hard market, agents are facing both challenges and opportunities as they attempt to help their clients weather the storm.

Being proactive and strategic when it comes to placing and renewing risks while also leaning on strong relationships with carriers will assist agents in getting the job done in the commercial umbrella market this year.

Here are four tips for keeping clients' expectations in check and to help them successfully place their risks:

1) Educate clients. Educating clients about the current hardening of the market—rising premiums and lower capacity—will help “establish reasonable expectations and emphasize the importance of proactively managing the umbrella placement well in advance of the renewal date," says Dennis McGuire, casualty technical underwriting director at Nationwide.

Several factors have come together over the past number of years culminating in the hard market we have today. From wildfires and hurricanes impacting the property market to large jury award payments, the pressure on the commercial umbrella and excess markets is unprecedented. Clients in certain classes, such as the property market, will be hit with double-digit premium increases and lower limits compared to last year's renewal terms. This may come as a surprise to some. 

2) Start early. Beginning the conversation with clients and brokers well in advance of renewals will help place risks and deliver solutions on time, as well as manage expectations. While current market conditions remain challenging “agents should begin to look at their upcoming renewals, minimally at 120 days out, to ensure that they will have sufficient time to address any unforeseen challenges," says Nicoletta George, senior vice president, senior product line manager of excess casualty at AXA XL.

Presenting complete and accurate submissions to underwriters and highlighting the client's risk control measures, as well as other positive distinguishing characteristics “will aid in positioning accounts for the most favorable underwriting consideration," McGuire says. And while placing risks may take longer than it had done in the past because of decreasing capacity, “it will be important to have a good understanding of monoline umbrella markets and how to access them, whether directly or via a wholesaler." 

3) Develop relationships with carriers. “Agents should anticipate challenges with carriers and work with their underwriter partners to understand their concerns and address them," George says. Coupled with this concern is the risk of having to place a risk with numerous carriers, leaving the door open for possible coverage gaps. 

The current market turmoil is expected to continue through the rest of 2020 and possibly through 2021, so managing clients and working with carriers is essential. Agents need to review terms and conditions within umbrella policy forms and scheduled endorsements, placing coverage with carriers that have experience with and have made a commitment to the market. “At a time when the market is facing such turmoil, agents should be very cautious about placing business with carriers that come in and out of the market every few years," George adds.

4) Monitor emerging risks. The COVID-19 pandemic has resulted in the application of infectious and communicable disease exclusions addressing the hazards involved in conducting commercial activity during the pandemic, explains Dave Eudy, associate vice president, director of excess casualty, Burns & Wilcox. “Agents should routinely compare underlying carrier forms with the excess carrier forms to ensure exclusion language is not substantially different or whether changes have an impact on their client." 

As federal legislation loosens on substances such as cannabis, CBD and hemp products, agents need to monitor federal legalization “before excess carriers begin offering the significant capacity to meet this building demand," Eudy says. “Once reclassified, we expect swift response from those carriers that have been developing standalone excess products in anticipation of this change."

For emerging markets, agents should work with brokers who have been developing an expertise in and have been cultivating market relations. “Establishing these connections now is critical to quickly delivering reliable solutions for clients once the demand is no longer restrained," Eudy adds.

Olivia Overman is IA content editor.

15431
Monday, September 14, 2020
Commercial Lines