Casualty insurance has seen a decline in coverage and pricing in the 2022, with both of them presenting potential challenges to the insurance market.
Environmental, social and governance (ESG) concerns appear to be on the rise and could impact insurer underwriting decisions. The report also talks about an increased focus on clarifying or excluding chemicals, energy, communicable disease (COVID-19), abuse and molestation, and wildfires.
Insurers review insurance coverage
While still early, the impact of COVID-19 and the war in Ukraine will likely have insurers review coverage definitions continuing a trend to narrowing or limiting coverage.
While pricing for worker’s compensation continues to be profitable, consistent and stable, auto liability remains unprofitable, and has seen a continued rate pressure in 2022.
Pricing in the marketplace is competitive, showing slow increases driven mainly by loss severity. Umbrella and excess and market remains challenging with rate and growth in client being major price factors.
While coverage and pricing have seen a decrease, continues the report, retentions have remained stable with no changes, and although capacity has increased, it still faces potential challenges.
Insurance capacity is still constrained for difficult risks
The report shows that capacity is still constrained for difficult risks; being readily available for less complex risks. Many insurers have indicated a focus on growth in 2022 with potential to open capacity for difficult risks, which will come with significant rate impacts which reflect the risk.
Finally, new insurer capacity continues to emerge, but not with lower rates, and very limited appetites. Auto liability capacity will continue to be limited, possibly seeing more insurers exit the marketplace. Reinsurance market remains capitalised.
What Is Casualty Insurance?
Casualty insurance is a broad category of insurance coverage for individuals, employers, and businesses against loss of property, damage, or other liabilities. Casualty insurance includes vehicle insurance, liability insurance, and theft insurance.
Liability losses are losses that occur as a result of the insured’s interactions with others or their property. For homeowners or car owners, it’s important to have casualty insurance as damage can end up being a large expense.
In addition to auto and liability insurance, casualty insurance is an umbrella term traditionally used to describe many other types of insurance, including aviation, workers’ compensation, and surety bonds.
Probably the best example of how casualty insurance works is an auto accident. Consider this hypothetical example:
Let’s say Maggie backs out of her driveway and hits Lisa’s parked car, resulting in $600 of damage. Because Maggie was at fault, she is legally liable for those damages, and she must pay to have Lisa’s car repaired. Liability insurance would protect Maggie from having to cover the damages out-of-pocket.
How Casualty Insurance Works?
Just as you can purchase property insurance to protect yourself from financial loss, liability insurance protects you from financial loss if you become legally liable for injury to another or damage to property. To be legally liable, one must have demonstrated negligence—the failure to use proper care in personal actions. If negligence results in harm to another, the offending party is liable for resulting damages. People in the insurance industry often call liability losses third-party losses. The insured is the first party. The insurance company is the second party. The person to whom the insured is liable for damages is the third party.
Most business owners need to have casualty insurance coverage because, if you produce something, the possibility exists that it may end up harming someone.
Even if you are a sole proprietor, it’s a good idea to carry insurance that is specific to your line of work. For example, if you’re a freelance auto mechanic who works from your shop, you likely won’t need workers’ compensation coverage, but you should have insurance that covers a situation in which a repair you made causes injury to a customer.