Inflation, from claims to reinsurance, keeps the gas on rates: Gallagher
Insurer worries over rising claim and reinsurance costs will continue to add upward pressure to a primary rate environment that has already been retaining nearly double-digit growth well into the second quarter, officials at global broker Arthur J Gallagher have said.
“Looking out to the second half and next year, we believe carriers are seeing potential for an increase in loss cost, the impact of inflation and current macro uncertainty, and increasing reinsurance costs which are likely to keep rate increases very similar with recent periods,” the chief of Gallagher’s US brokerage services, Mike Pesch (pictured), told an investor call.
Any such upward pressure on rates will only add to a market that has defied all prior expectations for rate moderation in 2022.
Gallagher is reporting a 9.6% annual increase in rates on average across segments to date in Q2, an acceleration from Q1’s 8% growth rate and within a point of the prior year pace. Inside the basket, property leads with a 14% gain, casualty is up 8%, workers’ comp has risen 5% and professional liability is up “about 3%.”
“Carriers continue to push for rate increases, especially for clients with challenging risk profiles,” Pesche said. “Effectively, every line of business continues to experience upward pressure on renewal premiums.”
Broad-market selectivity trumps any arrivals of new capacity.
“While we have seen some new market entrants in 2022 that have helped certain pockets of the market, finding significant capacity for coverage or carriers willing to carry large lines is still difficult,” Gallagher said. The dispersion of high gains in cyber versus relatively flat rates in D&O still shows a “healthy and rational market” where carriers “take on rate where they need it and not where they don’t.”
Rates in casualty have been somewhat milder, but medical and social inflation could yet raise their head to “drive another round of renewal premium increases” albeit “perhaps at a lower level than in previous years.”
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