State of the Market: Public Entity, Education and Pooling 

Each year, Alliant Public Entity prepares a State of the Market report for our clients that recaps market trends from the year and provides insight on what we anticipate will impact our clients most significantly in the year ahead. Key highlights from this year’s report are below. Please contact your Alliant representative to request a full copy of our informative report. 

Property

• Reinsurance

The start of 2023 saw January 1 treaty renewal results that were far worse than any market initially anticipated, with most renewals experiencing significant increases in rates, higher attachment points, and restricted terms and coverage. This was largely due to investor fatigue from years of losses and unprofitability, which led to many incumbents reducing capacity to “de-risk” their books. Looking ahead to treaty renewals for January 1, 2024, most markets anticipate more straightforward and organized renewals.

• Valuations

Valuations continued to be the hot topic item throughout 2023 renewals. Insureds without a compelling narrative surrounding insurance to value continued to be penalized by insurers, with some carriers unwilling to offer capacity that does not include Occurrence Limit of Liability (OLLE) or margin clause provisions. As we move into 2024, valuations will remain top of mind for many insurers; however, the amount of scrutiny will vary on an account-by-account basis depending on the overall valuation methods and steps that have been taken over the last two to three years (i.e., substantial trending, appraisals, etc.) 

• Strained Capacity/Substantial Rate Pressure

With the prevalent reinsurance constraints that existed throughout 2023, U.S. and international insurers alike offered far less capacity, especially for insureds with significant natural catastrophe (CAT) exposures (such as windstorm, flood, earthquake, wildfire and convective storm). As a result, we saw the number of carriers required to fill programs drastically increase. Excess layers on large programs continue to be the toughest to fill out and many buyers opted to purchase less overall limits.

Significant rate and premium increases continued to be the norm for 2023. While CAT-exposed risks faced relatively higher increases, all risks were subject to valuation discussions on top of the rate uptick, which drove overall rate/premium upward.

For 2024, rate increases are still expected for all types of property accounts, although not as severe as those seen during 2023. With the 2024 treaty renewals anticipated to be more orderly, expect capacity to be less constrained specifically for those accounts insurers view as quality risks (where certain markets might even aim to expand slightly upon their expiring deployed capacity). As for Florida and other CAT-driven risks, in addition to continued pressure on rates, anticipate CAT peril specific deductibles to be continually pushed and/or increased (i.e., higher than customary percentage named windstorm deductibles, severe convective storm percentage deductibles, etc.).

Casualty

The casualty market continues to be firm and replacing capacity can be challenging. Loss impacted accounts are often forced to take higher retentions, more restrictive coverage or less overall limits.   

Carrier loss cost rates continue to rise and have been largely impacted by adverse development on older claims. Third party litigation funding and hyper social inflation remain the key influencers of upward rate pressure. Many casualty treaty reinsurers are expressing concerns around rate adequacy although the current investment yield from interest rates should help temper significant change.

Underwriters are seeking revenue growth and profitability while maintaining a conservative and disciplined approach. There is continued scrutiny and focus on sexual abuse, state specific reviver laws for victims of sexual abuse, law enforcement, state specific weakening of tort caps, social inflation and auto liability.  Emerging risks including new technologies, such as AI, telematics and use and storage of biometric, while growing concern around mental health impacts on productivity and workplace environments are being examined closely. 

Please contact your Alliant representative to request a full copy of our Public Entity State of the Market report.