The hard market continues as we navigate our way through the first half of 2023. What does this mean for your business? In the short-term, it means continued difficulties in procuring coverages and renewals, as well as expensive premiums when you manage to obtain a policy. Despite these current challenges, there are reasons for long-term optimism.
Insurers and brokers are adapting and innovating in the face of a years-long turbulent insurance market. To take advantage of these innovations along with new competition from insurance carriers to cover new risks, businesses must take a proactive approach to risk management.
The biggest story in the market right now is undoubtedly commercial property. From rapid inflationary trends impacting valuations to the continued impact of climate change, premiums are beginning to soar, even when compared to the height of the current hard market cycle. According to the Council of Insurance Brokers and Agents (CIAB), rates were on the rise by 16% at the end of 2022 and are expected to continue surging.
- Capacity is shrinking as insurers struggle to underwrite risks.
- The property market is currently divided into two groups: properties that are exposed to catastrophic events (CAT exposures) and those that are not.
- The United States property & casualty industry recorded nearly $27 billion in underwriting losses in 2022.
- There is currently a mismatch between supply and demand for capacity, which is leading insureds to make difficult decisions regarding increased retentions, reduced limits or alternative risk financing options.
Rates in the cyber liability market are beginning to stabilize, largely due to efforts by companies to increase security protocols, such as using multi-factor authentication, endpoint detection and response, employee training, and backup segmentation.
This has improved underwriting performance, but companies are not out of the woods yet. Cybercrime is on the rise and criminals are becoming more sophisticated, making organizations of all sizes potential targets.
- Ransomware is rising, but paying a ransom will not help businesses avoid litigation.
- We are currently observing an increase in regulatory investigations. We anticipate this will lead to more fines and penalties at the state and federal levels.
- Cyber litigation is on the rise, due to an increase in the frequency of class action laws, particularly after data breaches.
- Privacy concerns are growing, with issues stemming from biometric laws and the Video Privacy Protection Act of 1988 for pixel and tracking codes.
- Bad actors are still active, resulting in $10.3 billion in losses last year, according to the FBI Internet Crime Report 2022.
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