2022 Q2/Q3 Commercial Insurance Market Outlook

Updated as of 5/17/2022 

Overall Outlook 

The first quarter of 2022 has been essentially a continuation of the tail end of 2021. National and international business and political crises continue to impact all industries in the U.S. Many of the continued challenges expose and create new risks in an already challenged world. 

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, program coverage limitations and capacity limitations — soft markets are the inverse. 

The current market conditions and forecast for 2022 rates are considered “moderately hard” market conditions which indicates some progress from 2021 which was widely considered a “firmly hard” market. 

Current hard market conditions include impact from the COVID-19 crisis, social inflation, climate change, and lack of new capital entering the insurance market. 

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. Increased premiums and deductibles along with coverage reductions and limitations are common. Also, risk prevention strategies that once were suggested by carriers to control risk have evolved to mandated investments for insureds. 

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:

General liability 10-20% 
Umbrella 15-25% 
Workers compensation 0-2% 
Auto 5-10% 
International Executive Risks 0-2% 
Directors and officers private/not-for-profit (overall) 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