Our auto and general liability rate trends for Q1 are bringing us back to the ‘90s—at least for those who remember the TV show Twin Peaks. We’re seeing twin peaks in our statistical analysis graphs, meaning there are two distinct rate trends (i.e., bimodal distributions):
- One for more vanilla risks, where rates are flat or increases are negligible
- One for more flavorful risks, where higher increases are the norm (though on average rates are still being served up softer than they were last year).
Why is This Happening?
Is the marketplace paying some elaborate homage to director David Lynch? Perhaps. A more likely explanation may be that we are seeing increased capacity competing for attractive auto liability and general liability business. The source of that capacity appears to be Workers’ Compensation carriers that want to diversify their portfolios—but carefully, so that only part of the marketplace is affected. Hence the twin marketplaces and the twin peaks.
Why are the Markets Diversifying in This Way?
Precisely because they don’t want to return to the ‘90s, when combined ratios for Workers’ Compensation were, well, peaking out of sight. Several carriers went under as a result.
Of the top 10 Comp insurers in 1989, only four are still in the Comp business today. Whether or not any of the markets miss an old favorite TV series, the twin peaks in our casualty numbers show that no one wants to go back to the reality horror show that was the Workers’ Compensation marketplace in the ‘90s.
Buyers and their brokers will want to make every effort to communicate the quality of their risk and give themselves the best shot at the western edge (left side of the graphical distribution) in today’s casualty marketplace.