Geography Trends
North America
North America Q3 2021 Overview
See below for insights related to the landscape, market dynamics and claims dynamics in North America, or select a geography below to take a closer look.
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North America Landscape
Both Canada and the US have faced fourth waves of COVID-19 in the third quarter of 2021, while their governments raced to vaccinate their populations and avoid returning to economically damaging lockdowns. Although Canada has reached more of the population in its vaccination drive and has seen correspondingly lower death rates, however, the US has experienced a more consistent economic recovery and had returned to growth by the end of the second quarter.
Like other parts of the world, North America will see major infrastructure spending as part of efforts to boost the economic recovery, although in the US in particular the level of expenditure remains subject to heated debate. Other uncertainties for the economic outlook are global supply chain disruption in the wake of the pandemic, adding to the earlier impact of US-China trade tensions, and rapidly rising fuel costs, although as of the beginning October these had impacted North America much less than Europe.
As for the insurance market, conditions continue to stabilize as combined ratios shift, capacity continues to flow in, and pandemic-related underwriting uncertainty subsides. A refocus from remediation toward growth continues. The industry is experiencing a war on talent. Shortages and resource pressures that existed pre-COVID have only been exacerbated by a pandemic-driven shift in workforce behaviors and mindsets.
Market Dynamics
Rates The pricing environment has moderated, with a continued deceleration of rate increases, with the notable exceptions of Cyber, and in Canada, D&O.
Capacity Capital is flowing in from traditional markets, de novo markets, and via bolt-on capabilities, making a material impact on available capacity.
Underwriting While the pandemic-driven uncertainty of 2020 has subsided, underwriters are responding to rapidly changing risk profiles and losses through heightened scrutiny and underwriting rigor.
Limits Limits remain consistent, with changes driven primarily by insureds’ cost management strategies.
Deductibles Deductible increases are driven primarily by insureds’ price reduction strategies. Insurer-imposed increases apply most often to poorly managed and/or poor performing risks.
Coverages Coverages related to Communicable Disease and Contingent Business Interruption were clarified/excluded on past renewals, but language continues to evolve. The current focus has shifted to Silent Cyber, and Opioids.
Claims Dynamics
The impact of the pandemic on staffing is translating to delays in the claims process: Throughout all functions of the claims process, staff turnover as an outcome of the pandemic is contributing to lengthy delays across all lines of business. Employee retention challenges causes remaining claims staff resources to feel overburdened resulting in a degradation in efficient claims adjudication and noticeably slower coverage decisions.
Claims-related litigation activity is resuming: Discovery, mediation and trial activity has increased as courts resume post-COVID. While it remains to be seen if the trend toward an increase in nuclear verdicts and social inflation that was evident before COVID will return in full force, some experts have posited that it may even trend up based on the events of the last 18 months (i.e., climate of political division, civil unrest, and general frustration with the state of the world, etc.) and may make juries more likely than ever to award larger verdicts.
Lack of clarity on Cyber coverage triggers continues: As ransomware claims increase in frequency and severity, insurers are spending a great deal of time, especially on the business interruption portions of the claims. Requests are perceived as invasive with a high degree of scrutiny, as the trigger of coverage in certain circumstances be unclear.
Late reporting of claims is still a very big issue and remains a reason for initial claim declinature. While such situations can often be resolved through advocacy and intervention, failure to report on a timely basis, or even to register a potential notification, is a generally avoidable situation.
