How to Operate in Today’s “Bananas” Casualty Insurance World

Leaders of the casualty insurance practices of a global insurance carrier and a North American specialty brokerage offered insights for insurance buyers and sellers to deal with today’s casualty insurance market during a webinar in February.

Their main message was exactly that: “You have to operate in today’s world.”

Bill Chepulis, head of Large Casualty for U.S. National Accounts at Zurich North America, made that statement when offering an analysis of what’s fueling continued loss severity–and rate increases–in casualty and transportation lines, which are expected to continue. The number-one driver is the broken legal environment.

“I can’t solve that today. And even if I could, by the time it works its way through, the impact is a couple of years down the road, at least,” Chepulis said. “You have to operate in today’s world,” he added during a webinar hosted by Zywave titled “Casualty Craziness: What’s the Cause and What’s the Cure?”

For customers, one way of operating in today’s world is putting in work to become better risks, he said, suggesting that insureds need to pay as much attention to liability risk management as they have been devoting to workers’ compensation risk in recent years.

“I see it and feel it when I’m sitting down with the customer. There’s a lot of great material–they’re very proud of what they’re doing in terms of mitigating the workers’ compensation risk. And then there’s like 10, 15 minutes around what’s happening on the liability side,” he said, suggesting more attention needs to be focused on contract certainty for general liability and on technology for managing auto risks.

“It’s not a news flash that there is a bifurcated element to the casualty market,” he said, referring to the fact insurers are seeing an unbroken multiyear period of profits for the workers’ compensation line “offset by continued severity issues in liability–the general liability and the auto lines up through the excess.”

“That continues into ’25,” Chepulis said.

Moderator Jeff Cohen, a Zywave senior vice president, led off the webinar by asking Chepulis and Mike Vitulli, National Casualty Practice leader at Risk Strategies, to lay out their assessments of the current casualty insurance market.

For his part, Vitulli offered a one-word description: “The market is ‘bananas'” from a client’s perspective, the broker said.

“Clients can understand a year or two of increase,” he said. But that’s not today’s reality. The casualty market is now in the sixth year for rate increases by his count. If you’re a client, you’re saying, “Hey, my program is running well. What do I have to do before I stop getting 16 percent umbrella increases?”

Toward the end of the webinar, Vitulli stressed that the difficulties casualty insurance buyers will face in 2025 are not anything like the 1986 hard market where coverage was not available. “For most geographies and industries, it’s available. It just might not be the price point you want,” he stressed, noting that clients are going to continue to deal with having smaller blocks of limits and more participants in their excess towers. “If we can get past the lead $10 [million], you can build a tower. It might take more work, it might take more layers, … but there is still sufficient capacity.”

Reviewing recent history, Chepulis said severity has “basically doubled since the beginning of COVID, and frequency in the auto line is back to the historical average.”

Jim Blinn, vice president of Client Solutions at Zywave, showed a slide later in the session revealing that the rate per million on excess liability has also doubled since 2020. Blinn’s figures showed the rate per million for a $50 million excess liability placement rising by 20 percent or more in almost every year since 2020, to $7,700 in 2024. The rate per million had hovered around $3,000 from 2015-2019, he showed, referencing data from a Zywave database of transaction data from brokers and wholesalers.

Like Vitulli’s “bananas” characterization of casualty insurance market pricing, Blinn offered his own unique descriptor of what’s happened to loss severity, rejecting the usual insurance jargon to narrate a slide depicting median loss amounts above $1 million (a typical umbrella attachment point) over the last two decades. “Around 2015, 2016, things started to go a little bit ‘kerflooey,'” he said, noting that the years before that break point showed a median consistently around $2.5 million, rising to $3.0 million and climbing further upward to about $6.0 million in 2024.

“It’s a problem in the sense that I’m not sure that [insurance] companies priced for this. They didn’t anticipate that things would be going this crazy,” Blinn said. “It’s not clear that the prices that were charged for losses that are now hitting policies reflected or anticipated these types of dollar amounts.”

From the customer’s perspective, Vitulli said, “I’m just not sure that people are listening enough to the reality of what the well-funded plaintiff’s bar is doing,” also referring to the impact on insurance company loss costs, which filters through to pricing. “Insurance companies are actually in business to make money, and our clients sometimes forget that,” he said.

While the “shock losses” that are in the news are apparent to everyone, what customers aren’t seeing is “the $250,000 claim that’s now a $3 million claim,” Vitulli said. “Those are the more subtle ones,” impacting lead umbrella carriers and excess carriers who used to price their business understanding that those levels would happen “once every 55 years… Now, I might have a claim every third year. It’s almost like flood in a flood zone. It’s become an active layer,” he said.

Echoing Chepulis, Vitulli contrasted the trajectory of workers’ comp and liability results for carriers, suggesting to insurance buyers that combining the good with the bad could help them navigate insurance market challenges. “Let’s face it, whether it’s middle market or upper middle market or large, that [workers’ comp] market is competitive for most risks in most jurisdictions.”

“What does that leave you with, though? It leaves you with the general liability and the auto and the excess,” the broker said, describing the situation faced by clients that have not gone through the work of putting their programs together “with a thoughtful, cohesive structure in mind.”

“You leave yourself with something that’s hard to place,” Vitulli said.

He offered a typical back-and-forth between client and broker that starts with the client asking for help with an auto placement, and the client later disclosing that the comp and GL are placed with other insurers. “I’ve got to tell you, those are almost unsolvable today–unless you can beg Progressive to do it or if you can beg one of your other partners to do it.”

Chepulis agreed. “People ask me all the time, ‘Is this a broad brush…’ approach that carriers are taking? ‘…Is everybody getting the same 20, 25, 30 percent…’ price increase?

“The answer is no. There is ability to differentiate… The first question I ask if an account gets to my desk [is whether it’s] best in class, worst in class, mid class? The next question will be what’s the structure. Do we like the attachment points? Do we all agree that this is a sustainable program? And is this the right relationship? Are we all bought-in in terms of where we want to go and the values between the carrier, the broker, and the customer, and the buying behavior and why?”

Returning to the central theme of the webinar, Cohen directly asked panelists to offer advice to buyers and sellers navigating the current market.

Chepulis said fitting coverage to exposure is paramount.

Specifically, he reminded listeners that primary coverage is fit to handle frequency, while true excess is intended for infrequent severe losses. “I sit down with a customer and then they’re very proud, sometimes, that they only have a few umbrella losses. [But] the umbrella product isn’t made for a few umbrella losses. That’s not something to be proud of.” Instead, carriers are expecting “maybe one in the return period, which should be 20, 30 years. That’s how it’s priced,” he said, imploring buyers and brokers to set the right attachment point.

He also repeated his earlier statement suggesting that conversations aimed at differentiating risk can go a long way with carriers. Some industries have multiple exposures, he said, offering the example of hospitality where underwriters will be thinking about sexual abuse and human trafficking exposures, security protocols, and passenger transport. “As a risk manager, you have to be able–without hesitation–to articulate what you’re doing to control and mitigate those risks, and how are you best in class–how are you investing–not just today, but how are you planning to invest in the future to stay ahead of the curve from a technology and from a control standpoint,” he said, offering the PFAS and third-party hauling risks of the manufacturing sector as a second example.

Finally, Chepulis advised, “Now is not the time to go on the cheap” with claims handling. “The dollars and pennies that you’re saving upfront is going to cost you in the end,” he said, referring to motivations geared toward the most efficient claims services.

“Now is not the time to go on the cheap both from a coverage and from a servicing standpoint. In fact, I would actually do the opposite because all it’s going to take is one claim, and the return period on those savings is not going to work out,” he said.

“How do you become a better risk? How do we help our customers become better risks? And then when there is a loss, do you have the best claim handling to respond?”

“It could be a carrier. It could be a TPA… There are definitely customer classes out there where I’d say, ‘This TPA might have a better solution.’ If it’s a better outcome, I’m all for it, because at the end of the day, I’m looking for the best outcome for the customer and for us,” he said.

Vitulli offered advice directly to brokers: Protect your E&O and negotiate the entire program, he urged. “Protect your E&O by always offering higher limits to your customers,” he said. Anticipating objections like, “I’ve known this client for 10 years [and] I know they’re not going to buy anymore,” Vitulli said. “Tomorrow when they have a $52 million claim and you only offered them $50 [million], they’re going to point the finger at you.”