Commercial P&C rate increases accelerate to 8.9% in Q3 as cyber jumps by 27.6%: CIAB
Commercial P&C rate increases accelerated to 8.9% in the third quarter, ahead of the 8.3% gain in the second quarter, led by a record 27.6% jump in cyber pricing, the latest pricing survey by the Council of Insurance Agents & Brokers (CIAB) showed.
The pickup in cyber rates marks an advance from the 25.5% increase in the second quarter, though the rate strengthening for the line is less drastic than between the first and second quarters. In the first quarter, cyber pricing rose 18%.
The pace of rate increases for property and commercial auto business – which amounted to 10.3% and 7.4%, respectively – were higher in Q3 than they were the Q2, when commercial auto pricing rose by 6.8% and property pricing was up by 9.9%. General liability pricing rose by 6.3% in the quarter, compared with 6% for the three months ending in June.
Notably, umbrella rate hikes slowed to 16.9% from 17.4%, in line with market commentary suggesting that competition in the business line had become more pronounced. The price increase for umbrella business was down from the 19.7% rate gains registered in the first quarter.
The overall commercial increase in rates across all lines of business marked the 16th consecutive quarter of price increases across all account sizes.
By account size, large accounts had the highest increase out of all account sizes, at 10.4%, while prices for small accounts increased the least, at 6.2%.
Survey respondents attributed the continued cyber spike to rising cyberattacks, specifically ransomware, phishing and social engineering attacks. They also noted that cyber has been underpriced, due to a lack of historical data and competition incentivizing carriers to keep prices low.
Yet, demand for cyber insurance remained very high in Q3 2021, despite increased carrier scrutiny, additional loss controls and high premiums, the report said.
Ken Crear, president and CEO at CIAB, said: “Brokers and clients that take proactive action on cybersecurity risk by implementing stricter loss controls, such as requiring multi-factor identification for access to company systems and employee training, will be at a distinct advantage when it comes to finding robust, affordable cyber coverage.”
As a signal of the market shift, Aon’s Global Market Insights report for Q3 2021 recently said that cyber has surpassed D&O and natural catastrophe risk to become the most strained class of business for insurers.
Beyond reporting pricing, respondents also noted an uptick in claims for commercial property, commercial auto, and workers’ comp in particular, as employers began to bring employees back to the office.
“Claims are still below pre-pandemic levels but increasing as more people are on the road and back to work,” explained one respondent from a large Southwestern firm.
“Courts started to open, people were out on the road driving and severe weather events increased,” said another respondent from a large Northeastern firm.”
Industry executives have recently begun adopting a more cautious tone on market conditions, with the CEO for wholesale intermediary Risk Placement Services telling this publication that the year ahead is likely to be turbulent from a pricing and capacity standpoint, as fears over accelerating loss trends mount.