One80 expects the market to continue to harden throughout Q1 2020

Christopher Pesce, National Director, One80 Intermediaries

The tumultuous market conditions of the last several quarters show no sign of abatement as we enter 2020, leaving many industry observers to wonder whether rates will begin to plateau. The current pricing environment represents a near perfect storm for consumers with virtually all lines of insurance experiencing upward momentum. Market conditions are expected to continue to harden throughout Q1 2020 as carriers continue their remediation plans by reducing capacity allocations and scaling back coverage grants.

Traditionally, hard market conditions have been severe corrections of relative short duration followed by several quarters of slow decline. Historic market cyclicality has come as the result of event based depletions of the industry’s capital base as we saw in Hurricane Andrew, Katrina and the attacks on the World Trade Center. The current market conditions, however, are less event-based, and more the result of systemic deterioration in carrier performance.

Carriers in the Property and Casualty sector have had to manage through a decade of unprecedented low interest rates as the Federal Reserve has focused monetary policy on the recovery and sustainability of the overall U.S. economy. Combined with trends toward larger jury awards and frequency of loss reserve adjustments, several of the industry’s most significant carrier participants have undergone operational and strategic remediation and will need to demonstrate long term pricing discipline.

The systemic nature of the current market cycle suggests a sustained firm pricing period may ultimately precede any type of market decline despite record surplus levels of over $800 billion through the first nine months of 2019. Q3 saw the largest overall price shift since 2013. Management Liability increases are well into the double digits, with EPLI and several professional liability lines showing meaningful increases. Transportation risks continue to see unprecedented hardening, particularly for new venture trucking and long haul risks, while CAT Property rates continue to push higher.

Carriers are likely to remain conservative in their pricing approaches in 2020, as investors look for evidence of pricing discipline and sustained performance. One message that came across in our recent meetings with Lloyds Syndicates is that value over volume is of the highest priority and central to Blueprint One.