Marketplace Trends and Claims Report Q1 2021: Financial Services and Management Liability

Our reporting on trends is indicative of the larger insurance space. Like other industries, the Insurance and Financial Services industry, in general, is increasingly influenced by global climate and political change. Increased catastrophic weather activity has been reported and extensively discussed by other experts in a variety of different insurance segments. This represents one of the key drivers in insurance and its impact has been felt across many—if not all—lines of insurance.

Specifically, in the areas of Financial Lines Insurance – Those insurance segments that particularly impact the management and professional responsibilities of businesses, those weather trends have continued to contribute to conditions that make insurance placement on behalf of clients more challenging. Generally speaking, the cost of purchasing the insurance (pricing), the aggregate risk transfer amounts that insurers are willing to accept (limits and retentions) as well as the breadth of contractual provisions transferring risk (terms, conditions and enhancements) have all be significantly impacted by a generally hardening trend that has persisted for several financial quarters.

Additionally, litigation and risk activity are particularly pronounces space typically addressed though financial lines insurance. In the claims or litigation contexts which are also included in this update, we are seeing increases in key indicators that we estimate will influence more persistence in this hardening trend. While we are seeing pockets (like for private company management liability) ,where limits have found some stability over the last quarter. Litigation trends—especially in connection with public securities—is still continuing to rise and present costly risks for insurers to consider. We believe this is having a particular impact on pricing, terms and conditions for public company management liability as well as activity in connection with Special Purpose Acquisition Companies (SPAC’s).

On the whole, market conditions are still very challenging for clients in the management lines space and we forecast significant increases on most lines for the foreseeable future (especially within the next 12 months).

For Professional lines, we have seen mixed signals of the market challenges exhibited on the other products. We have seen some premium relief for some segments and some relaxation on aggregate limits pressure. However, we have also seen more restrictive terms and conditions on the policies that will likely persist into the future.

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