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State of the North America Insurance Market as we move into a New Year

Joe Tocco


CEO, Americas, AXA XL

While it has been a challenging two years of navigating through a global pandemic, I’m feeling optimistic.

Undeniably, we’re still feeling the impact. For one, a new variant. Lockdowns in some parts of the world. Inflation. Supply chain disruption and shortages.

There are still plenty of reasons for my optimism, however. For one, despite significant challenges, the industry performed well. In fact, according to an AM Best report, “the effect of the pandemic on the performance of the commercial insurance segment has been modest over the past 18 months, with better underwriting results in 2020 than in 2019 on a normalized basis. As an industry, we’re navigating through this prolonged pandemic stronger than we entered into it.

Moving in a positive direction

The pandemic also jumpstarted much needed changes -- especially our digital and technological transformation. There is no going back now. And that’s a good thing. We need to push further to speed up our processes, access more data to support our decisions, and create greater efficiencies wherever we can.

Crisis situations like this global pandemic highlight the need for solid insurance protection and better risk management – certainly a reason for optimism for those of us in the industry. With businesses paying closer attention to their coverage needs, the global insurance market has demonstrated strong growth and seen record premiums.

Again, AM Best recently revised its 2022 U.S. property/casualty commercial lines insurance industry outlook from negative to stable, despite continued challenges including inflation and continued pressure from jury awards and settlement costs. Others, including Fitch Ratings, have expressed similar positive outlooks. All in all, the shared consensus believes the industry will be profitable with its solid ‘risk-adjusted capital position’ and resilient in the face of continued challenges.

To get here, insurers had to reduce limits and adjust risk appetites. That’s also created more opportunity in excess & surplus (E&S) lines. According to WSIA, in the first half of 2021, surplus lines premium reported totaled $24.04 billion, up 21.9% from the year-earlier period. Given the growing need for coverage for harder to place risks, our E&S business lines are building up resources and adding seasoned surplus lines talent to keep pace with our clients’ coverage needs. They are braced for a busy 2022 which will likely continue to see a strong demand for nonadmitted coverage.

Staying on our corrected course

In both the standard and E&S markets, opportunities for growth have encouraged new entrants to our market and will inevitably spark more competition. Here’s where we’ll need to exercise caution, sticking by our underwriting discipline. We’ve spent considerable effort correcting our course, not only for our own profitability, but because – if anything this pandemic has taught us – we need to be ready to help our clients through the next crisis event.

The commercial insurance market has been through some significant, much needed firming, over the last couple of years. According to the latest pricing survey from the Council of Insurance Agents & Brokers, average commercial property/casualty premiums rose 8.9% in the third quarter, a slightly higher clip than in the second quarter. The factors that drove rate increases have not gone away.

Extreme weather continues to make headlines. The recent record-breaking tornados in Kentucky and surrounding states were unprecedented. The 2021 Atlantic hurricane season was the third-most active Atlantic hurricane season on record. Excessive rainfall and flooding battered parts of the US, Canada, and other parts of the world. Because of years of extreme weather, the property market took corrective action before other business lines. With continued, record-breaking weather, property insurers will certainly be cautious.

Litigation, not the weather, is the driving force of other increases. While the pandemic may have kept courtrooms closed, large judgments, the rising cost of litigation and a steady stream of lawsuits against businesses are only increasing. These factors continue to increase claims costs and will contribute to continued increases in umbrella, D&O, general liability, and commercial auto rates.

For similar reasons, we’ll continue to see double-digit rate increases for cyber liability insurance going into 2022. Ransomware attacks have been on the rise and, in fact doubling, according to the recent 2021 Verizon Data Breach Investigations Report.

While we may have little control over the weather, cyber criminals, or litigation trends, we do have ways that we can help clients boost their loss prevention efforts to stave off losses or at least minimize them.

Pushing prevention

While we may have little control over the weather, cyber criminals, or litigation trends, we do have ways that we can help clients boost their loss prevention efforts to stave off losses or at least minimize them. Loss prevention is not new in the insurance industry but there are certainly new ways to go about it.

Our Property Risk Engineering team, for instance, has a long legacy of helping our clients protect property from severe weather, fire, and other exposures. Clients also rely on their expertise to help assure their operations run smoothly especially when their products or services are needed most, like when our team support several large pharmaceuticals in the roll out of vital medicines. Given the data, analytics, and new technologies that they are able to employ today, they can stay connected to our clients, help them track products from every step in the supply chain, and collect more data in real-time to catch potential future exposures before a costly loss occurs.

Greater adoption of new technologies is helping us, and our clients, reduce risks in all sorts of ways. As part of our Construction Ecosystem, our Tech Library gives our construction clients access to technology that our Construction innovation team has curated, largely based on its risk-reducing potential each offers our contractor clients. One of our tech partners, WINT, recently announced that one of our clients is implementing its water management and leak detection technology to catch any water leaks on construction projects early to avoid big losses down the line. Behind fire, water damage claims are the second most frequent property loss in construction.

Other new technologies that offer great potential in controlling risks include:

  • AI technology to help review contracts
  • Online driver and safety training
  • New drone technologies
  • Tech-enabled recovery support for injured workers
  • Wearables that detect electric voltage, employee positions on jobsite, and more.

Given current commercial auto rates, there is growing interest in telematics and in-cab cameras that can increase driver safety. Our claim team also sees value in these technologies when managing an accident claim, especially when it gives us new data or evidence to strongly defend against a claim.

Of course, our reliance on technology is what has led to increased cyber security risks like ransomware. The industry is already working with government officials, cyber security industry leaders and others to determine ways to contend with bad cyber actors. In the interim, to step up our prevention and response to minimize losses and downtime, we created a new Cyber Incident Response team that we’ll be building out in 2022 to help our clients before, during and after a cyber incident.

The momentum for adopting risk-reducing technology and finding new ways to manage risks upfront to minimize losses will continue to grow in 2022. Greater attention to advance preparedness and loss prevention is our best strategy at minimizing the impact of what increasingly intense and costly risks, like weather, cybercrime and even climate change, that we can’t tightly control. Working with our clients, we’re intent on finding ways to help them understand what a change in climate might mean for their operations in the future.

New market realities call for greater collaboration

Given the increasing frequency and severity of the risks, not to mention how quickly these risks can change, increased collaboration between insurers, brokers and our clients will be especially critical going forward.

In the beginning of the pandemic outbreak, there was a lot of discussion about the “new normal.” With remote working and businesses pivoting to meet the new needs of the pandemic, we quickly learned that we needed to work together to evaluate changing risk profiles, find new insurance solutions, and manage the new risks we were all facing.

Our hybrid working arrangements with more virtual interactions and collaboration does not seem so new. It seems normal.

While the pandemic may have kept us physically apart for close to two years, it pushed us a lot closer together. That’s a big contributor to my optimism for 2022.

We need to keep up the connectivity we’ve established during the biggest risk event we’re all likely (hopefully) to see in our lifetimes. It’s pushed positive changes that we as an industry need to keep pushing forward. That’s why I’m especially proud of AXA stepping up and taking a leadership in the Net-Zero Insurance Alliance to help the insurance industry, and guiding and supporting our clients, in the transition to a net-zero economy. As an industry, we need to work together to address the most complex of risks, like climate change because, over the last two years, we’ve seen how powerful working together can be in finding the most innovative approaches to helping businesses manage quick-changing and costly risks.

Despite waves of virus outbreaks, vaccine mandate debates and the emergence of new variants, I’m hopeful that the lessons we’ve learned thus far will help us manage its future impact, like we do other risks, and allow us to move ahead stronger and more resilient than ever before, always with a cautious eye at what could be next. That’s my plan for 2022.

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Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. In this respect, our property loss prevention publications, services, and surveys do not address life safety or third party liability issues. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. The provision of any service does not imply that every possible hazard has been identified at a facility or that no other hazards exist. AXA XL Risk Consulting does not assume, and shall have no liability for the control, correction, continuation or modification of any existing conditions or operations. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any document or other communication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with our services, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.