SPECIALTY LINES MARKETS A “firm” market challenges agencies pressed to take on added risk By Joseph S. Harrington, CPCU O COMMERCIAL For a line featuring many short-tail claims, predictions of a sustained period of underwriting losses is not good news. But with severe long-tail bodily injury claims having a profound impact on operating results, and with interest rates rising, a combined ratio around 100 may be sustainable. So, will the better times last? Or do the immediate post-pandemic results mask unresolved imbalances in the line? “There was a period of stabiliza-tion, but then results took a turn for the worse in 2022,” says Nick Saeger, assistant vice president of transport-ation products and pricing for Sentry Insurance. “The stabilization in 2021 may have been a bit of a mirage aided by a decrease in accident frequency due to the pandemic. “In 2022, crashes started increas-ing again, though perhaps still not back to a pre-pandemic level,” he adds. “At the same time, severity continues to increase. “The forces that have driven social inflation—attorney involvement in claims and litigation financing, to name two—have not abated. In addition, physical damage results have been eroded as the costs of parts, labor, and used vehicles have skyrocketed.” Jennifer Ridgill, underwriting manager for commercial transport-ation and trucking at Johnson & Johnson Insurance, a wholesale ROUGH NOTES ver a decade of relatively benign conditions in property/ casualty insurance, commercial auto—buffeted by rising severities of both personal injury and physi-cal damage losses—stood out as a uniquely distressed line struggling to achieve stable profitability. Then, after several years of steep rate hikes, expanded implementation of vehicle telematics, and rigorous loss control efforts, commercial auto insur-ance finally produced a combined ratio below 100 in 2021. The ratio rose to slightly above 100 in 2022, and some experts predict it will hover around there through 2024. 32
Rough Notes June 2023: Page 32
