Casualty Lines and Pricing


Though there is still a great deal of capacity in the casualty marketplace, rates are firming after years of rising claim costs and emerging legislation that exacerbates the exposure.


“It’s not a hard market but it’s certainly a market that’s firming.” David Bresnahan, Lexington Insurance Company


In recent years, rates have been falling as claims costs have skyrocketed, leading to fewer and fewer profitable casualty portfolios.


The prevailing view of the overall market, however, appears to be that capacity is abundant and casualty rates remain soft, with the weak economy serving as a major contributing factor. Competition is yet another factor: as incumbent carriers seek to impose higher rates at renewal, carriers on the outside seem willing to charge lower rates to win the new business.


There are rising rates in certain corners of the construction, healthcare and transportation markets, however, especially for accounts that have experienced losses.


Construction defect claims are certainly a trouble spot that have driven up casualty losses. For some time, the courts have been wrestling with the issue of whether construction defects constitute an “occurrence” under a commercial general liability (CGL) policy, and several states that have recently passed new laws requiring construction defects to be treated as an occurrence under CGL policies.


NAPSLO is working to have these laws modified to restore the original definition of “occurrence” for surplus lines writers.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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