Updated as of 10/16/2022
Overall Outlook
In the commercial insurance industry, market cycles are typically referred to as a “hard” or
“soft” market. Hard market cycles result in premium increases, rate hikes, coverage limitations
and capacity limitations — soft markets are the inverse.
The current market conditions and forecast for the remainder of 2022 remain a “moderately
hard” market. Inflation is now the primary driver of rate increase with unknown impact as of
yet from Hurricane Ian.
Detailed and in depth underwriting of accounts continues to mount and the requirement of
implemented risk prevention strategies have moved from a “nice to have” to a “must have”
across all lines of coverage.
Outlook by Line of Coverage: Property
Commercial property insurance continues the uphill battle against unpredictable claims — often
due to uncontrollable weather conditions. Hurricane Ian is estimated to have a $75+ billion
impact on the insurance industry and while primarily affecting auto and residential property,
we still anticipate some fallout for the commercial property market. Increased premiums and
deductibles along with coverage reductions and limitations have been common even prior to
Ian.
Receiving true and accurate replacement cost valuations is becoming a dominant issue for US
property underwriters who are dealing with cost fallouts from underreported assets, as well as
a volatile economic environment marked by inflation, staff shortages, and supply chain issues.
In its mid-year review on the US real estate and hospitality market, global insurance brokerage
and risk management firm Gallagher said property underwriters are highly concerned with
receiving true and accurate replacement cost valuations. Costs to rebuild a structure with
quality materials continue to rise amid high inflation and global supply chain disruptions.
Premium forecasts:
| Accounts without catastrophic exposure | 5-10% increase |
| Accounts with catastrophic exposure | 10-15% increase |
| Accounts with catastrophic exposure AND claims | 20% or more increase |
Note that catastrophic exposure primarily relates to weather events such as wind storm,
hurricane, earthquake and flood but can also apply to the operation of the property and its
contribution to a catastrophic loss. Regions of concern include coastal Florida, North Carolina,
South Carolina, Georgia, California and Texas. Also, Oklahoma, Kansas and Missouri for hail and
tornado.
Outlook by Line of Coverage: Casualty
Social inflation continues to drive up premiums, create a selective underwriting environment
and force restrictive coverage terms and conditions. The term social inflation was introduced to
the industry in the past few years and is used to describe the rising costs of insurance claims
resulting from increased legal advertising, expansion of the litigation finance sector, broader
definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury
awards.
Workers’ compensation remains competitive and general liability has stabilized while
professional (errors and omissions), directors and officers, employment practices liability and
cyber liability continue to become more severely impacted. Companies buying these lines of
coverage undergo in depth underwriting, increased pricing and often coverage restrictions on
the renewal policies. Essentially, there are many more hoops to jump through to qualify for
what was more basic coverage historically.
Premium forecasts:
| LINE OF COVERAGE | PREMIUM INCREASE |
|---|---|
| General liability | 10-20% |
| Umbrella | 15-25% |
| Workers compensation | 0-2% |
| Auto | 5-10% |
| International Executive Risks Directors and officers private/not-for-profit (overall) | 0-2% 10-60% |
| Professional liability (errors and omissions) | 15-60% |
| Employment practices liability | 10-50% |
| Fiduciary | 5-25% |
| Cyber | 25-50% |
The BakerHopp Strategy
As your advisors of insurance and risk management, we are proactively prepared to work with you through any and all market adjustments. At BakerHopp Insurance Group, our core purpose is to contribute to the success of others—particularly our clients. We understand that our role in your success is to provide transparent, complete, and competitive options with detailed information on changes in coverage and pricing so you can make informed business decisions. Our model of service below is the cornerstone of our capabilities:
Sources: AmWins Q2/Q3 2022 State of the Market Report, USI’s 2022 Commercial Property & Casualty Market Outlook Report, Insurance Journal The View for 2022: P/C Insurance Predictions and Trends, Business Insurance “What the US Property Insurance Market Can Expect for the Rest of 2022”