Since mid-March, U.S. markets have been working through stay in place guidance while pockets of society are slowly entering phased re-openings. Against this historically challenging backdrop of uncertainty, what has become increasingly evident is that the value proposition of the wholesale insurance industry has propelled significant growth during this pandemic crisis. As the world shut down, the wholesale marketplace provided creative solutions, critical capacity and specialty-focused coverage for retail agents and their customers.
The changes in the market began as a seismic shift in the excess and surplus (E&S) market, which took hold in late 2019 and gained momentum in the first two quarters of this year. The wholesale market experienced a robust increase of insurance submissions as traditional markets cut back on coverage and available capacity in both property and casualty lines. The trend has been mirrored alongside modest to steep rate increases that are occurring predominantly in the umbrella and liability space, with the largest price hikes being seen in the directors & officers (D&O) sector. The hardening market in liability lines is expected to continue for an extended period and will likely continue well into 2021 and beyond, both despite of and due to the consequences of COVID-19.
As the U.S. was in the throes of the coronavirus pandemic and the economic crisis it produced, the wholesale market reportedly grew by 14%, according to the Wholesale Specialty Insurance Association (WSIA). Of note, while much of the industry has seen adverse effects of a COVID-19 induced economy, certain industry classes have been impacted favorably. Medical malpractice, particularly assisted living facilities, miscellaneous medical facilities and life sciences have all experienced material growth. Builder’s risk has sustained growth in pockets of the sector, specifically in multi-family housing developments. The CAT property market and the excess casualty market are both experiencing material market corrections in pricing and a decrease in capacity, which are also driving significant growth. While the economy is in a tailspin, the wholesale market is providing significant solutions and support within D&O and Employment Practices Liability Insurance (EPLI) to address the exposures companies are facing during the economic downturn.
During a time of distraction and fear, wholesale brokers and E&S carriers are focused on providing responsible coverage and disciplined underwriting to meet client insurance requirements. Recent months have shed a spotlight on the wholesale market’s responsiveness that has been driven by the tenacity, creativity and perseverance of the wholesale distribution channel.
In a demanding catastrophe property renewal season, a chaotic excess casualty market and an erupting D&O sector on edge, coverage disruption and policy exclusions related to COVID-19 are inevitable. While many carriers have a moratorium or exclusions on COVID-19 related exposures, Liberty Mutual and Ironshore are analyzing each risk on a case by case basis and providing creative solutions to their clients.