CRC: Cyber leads September acceleration in REDY pricing indexes

The latest monthly REDY indexes from US wholesale giant CRC Group reveal September rate increases averaging 48.7 percent in cyber, 16.2 percent in excess/umbrella, and 12.9 percent in private D&O, with all three accelerating from August.

The REDY indexes reflect average renewal pricing changes by month across the three lines of business

Commenting on the latest data, CRC president and COO Neil Kessler told this publication that the indexes demonstrate the consistent renewal pricing increases that continue to be seen in the E&S market.

“Whether it’s slowing a little bit or accelerating a little bit month to month, we’re still seeing consistent increases. There’s talk about the rate of increase slowing, but our data doesn’t show anything significant in that regard – especially in the context of increases for multiple renewal cycles in a row.

“And when we talk to our carrier partners none of them really see that changing. The fundamental drivers of what’s causing these increases are simply not changing,” he said.

Cyber saw the biggest increase and the most significant sequential acceleration from August, when the monthly renewal index was at +40.0 percent.

In September, 68 percent of renewals saw increases of 20 percent or more, up from 52 percent in August.

And the REDY data revealed that 12 percent of cyber accounts renewing in September experienced rate increases of greater than 100 percent, up from 9 percent in August.

Of the 68 percent of accounts in September 2021 with a rate increase greater than 20 percent, 48 percent were 50 percent or higher.

CRC said that the most challenging cyber classes include healthcare, real estate, collection agents, title/escrow, municipalities, schools and any risk with a high number of PII or PHI records.

The firm added that before binding new and renewal accounts most underwriters now require a completed ransomware application, multi-factor authentication, and fully implemented cybersecurity measures.

It advised clients to be wary of ransomware (extortion) sublimits from carriers including co-insurance, social engineering callback requirements, cybercrime that excludes third-party funds, short periods of restoration, or indemnity from business income or reputational harm related losses.

Escalating excess losses

The REDY index for excess and umbrella monthly renewals also accelerated in September from 14.5 percent to 16.2 percent, after three consecutive months where rate increases had slowed, from a peak of 18.5 percent in May this year.

The data revealed that 34 percent of accounts experienced rate increases of 20 percent or more, and 50 percent faced rises of 10 percent or more.

In commentary on the data, CRC said: “Excess losses are still escalating due to social inflation; the self-reinforcing trend of higher verdicts leads to higher expectations for awards and higher settlements. Litigation funding is gaining momentum as investors look to profit from this judicial climate.”

The wholesaler noted that new carriers are entering the excess space aiming to take advantage of the disruption, including some that are still in formation.

As previously reported, a number of new or rebooted carriers have entered the E&S space, as well as several MGAs with an excess casualty focus.

CRC said that difficult classes for excess casualty include high hazard accounts, transportation-related accounts, habitational, hotels, residential and New York construction, as well as any risk with sub-par loss experience.

Private D&O rate increases tick up

Meanwhile, private D&O rate increases picked up from 12.2 percent in August to 12.9 percent in September, according to the REDY index.

Rate rises had slowed over the last few months from 16.3 percent in April 2021. A total of 19 percent of accounts renewing in September paid increases of 20 percent or more, with 48 percent paying 10 percent or more.

CRC said that D&O insurers are requesting more information on debt including when it is coming due, to whom it is owed and relationships with creditors.

The report highlighted companies with nuanced risk profiles as the most difficult private D&O risks to place, including those in healthcare, real estate-related businesses, cannabis, crypto, fintech and unicorns, or privately held startup companies valued at over $1bn.

It added: “D&O underwriters are also affected by the worsening fiduciary liability market due to excessive fee litigation since fiduciary is often combined with D&O.”