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P&C hard market to extend through 2021 due to pandemic – Willis Towers Watson

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P&C hard market to extend through 2021 due to pandemic – Willis Towers Watson

North American commercial insurance buyers will continue to face upward pricing pressure across most lines of business, according to Willis Towers Watson PLC's 2020 Insurance Marketplace Realities report.

The company projects large reductions in insurable values due to the dip in economic activity. It noted that business lines are not yet predicting overall rate cuts, but the ultimate impact of COVID-19 and the economic downturn remains to be seen.

"The pandemic and economic downturn will very likely extend the hard market through 2021, with market discipline continuing as insurers' losses materialize and their investment income deteriorates," said Joe Peiser, Willis Towers Watson's global head of broking.

In the property segment, steep rate hikes continue as underwriters take a critical look at exposures, restricting coverage terms that are already being offered. The company said buyers considered catastrophe-exposed with losses could face rate increases of 30% or more.

In casualty, Willis Towers Watson observed that commercial liability has become more challenging as deteriorating loss trends continue to negatively impact profitability, except in workers' compensation, which remains stable. Its pricing forecast is a 2% decrease to a 2% increase for workers' compensation and a possible increase of 40% or more for umbrella insurance.

The company said the intense hard directors' and officers' market is worsening. Increased underwriting scrutiny of D&O exposures and price firming of primary and excess rates make for challenging renewals, and D&O prices could increase by more than 50%.

"To the frustration and disappointment of some, for the most part, a pandemic is not an insured event," Peiser said. "Nonetheless, this will no doubt be a reputational moment for the insurance industry, to be judged by the extent of which it was perceived to help organizations weather this storm."