Insurance availability and rates are forecast to be all over the map in 2022.

Willis Towers Watson weighed in with its end of year outlook for 2022 and the state of the insurance market.

The hard commercial insurance market continues, but as a steady, gradual softening brings a welcome deceleration in premium rate increases, we are reminded of one of the oldest and most fundamental marketplace principles: the law of supply and demand. Supply, in the form of additional capacity provided by insurance carriers, is up, and a rise in supply is doing what it does best: lowers prices.

For the most part, however, these numbers and the line-by-line commentary included here tell a simple story: a rise in capacity has lifted supply, and the laws of supply and demand have come to the aid of the insurance buyer.

Here are highlights from our 2022 predictions:

• Property rate increases are decelerating, especially for better risks; those buyers can expect increases of 2% – 10%.

• For challenged occupancies, rate hikes are forecast at 15% or more, which represents a continuing decline in increases over recent renewal cycles.

Property Update: A Cautious but Optimistic Market

From another perspective, Woodruff Sawyer’s “2022 PC Looking Ahead Guide” via JD Supra:

The commercial property insurance market in 2022 could see increased competition among renewals, as additional capacity continues to enter the market. Carriers are developing creative solutions to address an ever-changing risk landscape, offering more capacity, and coverage is stabilizing.

Yes, risk increases daily, and we’re seeing the impact of increased loss activity. However, the commercial property market continues to move in a positive direction. The average property rate increase YTD2021 is 8%. Additionally, we have achieved rate reductions on multiple renewals by creatively restructuring programs and introducing new capacity. We expect even better results in 2022 for insureds that continue to prioritize risk improvement.

New capital will continue to have a favorable impact on commercial property insurance renewals. For the first time since 2017, underwriters have new business goals, which will generate competition in 2022. In addition, clients’ risk mitigation efforts of the past four years are bearing fruit, with incumbent carriers looking to expand capacity and offer more favorable terms and conditions.

2021 Extreme Loss Patterns Set Stage for 2022

The California Surplus Line Association highlighted a January 3, 2022 Insurance Journal article in its own newsletter released a day later:

Unusual loss trends in 2021 called on the property & casualty insurance industry to play its role as the economy’s financial first responder. A look back at the most extreme loss patterns of 2021 sets the stage for the insurance-related issues we expect to dominate the 2022 public policy agenda. Loss experienced in 2021 boil down into two mega-trends: violently volatile weather events and shockingly large liability awards.

Bottom Line

Rates will vary depending on the location of a business. Companies in areas at high risk of natural catastrophes such as wildfire, hurricanes, hailstorms and tornadoes, are seeing the highest rate hikes, as well as non-renewals and even difficulty in securing coverage. For example, in wildfire areas of California rates were up over 20%.

What’s driving rates: Increasing frequency of natural catastrophes, as well as the severity of those events. Also, higher rebuilding costs due to materials price inflation and labor shortages.

Best advice: Risk managers, and brokers/agents need to manage stakeholder expectations as rate increases continue; they should consider creative solutions and alternative structures to mitigate the total cost of risk.
• Property is not a one-size-fits-all market; carriers are scrutinizing submissions.
• The need to differentiate risk has never been greater.

Take control; don’t just roll the dice. At Novita Insurance Solutions, LLC, our team helps its professional insurance broker and agent partners navigate an increasingly complex market. Click here for more information.