Guest Commentary By Ryan Hillestad, Missouri Bankers Insurance Services
varying degrees of volatility concerning insurance renewals. Some stability within the financial institutions’ insurance market has begun to emerge this year. Community banks remain a sought-aſter class of business because of their healthy performance and profitable loss ratios through the COVID pandemic. Tis article explores market performance through second quarter 2022 and forecast for the remainder of the year.
WHERE WE WERE • Companies faced a challenging insurance market overall from 2019 through second quarter 2022 — substantial rate increases, capacity issues and difficulties obtaining coverage.
Past, Present & Future: An Examination of the Insurance Market
• Carriers faced several escalating challenges that drove up claim costs, including increased storm activity, pandemic- related losses and social inflation — the trend of rising insurance costs as a result of increased litigation, plaintiff- friendly judgments and “nuclear” jury awards. Ultimately, pandemic losses did not live up to carriers’ worst-case scenarios.
• Carriers’ ability to offset weak underwriting results through investment income remained a challenge through 2021 because of low interest rates.
• By second quarter 2022, rate increases started to moderate in certain classes. Insurance companies’ books of business are in a better position than in several prior years.
WHERE WE ARE • Aſter three years of substantial rate increases, the market is moving toward rate adequacy as rate increases have decelerated slightly. However, complicating factors continue to impact the overall market, including social inflation, general economic inflation, geopolitical threats (Russia/ Ukraine war), storm losses and the overall legal environment in the U.S., such as the continued rise of third-party litigation funding.
• Not every service line is equal. Cyber has maintained a sizeable year-over-year rate increases with median increases of 45% while workers’ compensation rates have showed relatively flat pricing with median increases at a mere 0.9%.
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