Q1 2024 stat data: Digging more deeply into general liability
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Q1 2024 stat data: Digging more deeply into general liability

Loss picks for other liability are at a 23-year high, but that still may not be enough.

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In our reserves and claim count note published recently, we discussed the disconnect between increasing reserve releases and worsening claim count numbers.

Following that theme, we dug more deeply into the first-quarter general liability trends to see if the data indicated any shift in conservatism. and if any lines within the segment stood out.

Firstly, overall Q1 data shows a modest uptick in loss ratios over the past few years. The year-end reporting for the commercial insurers reflected continued adverse movements in the soft market years of 2015-2019. So, we expected a change in trends year over year.

Secondly, by drilling deeper into general liability trends, we noticed that the other liability loss ratios have ticked up to 62%, the highest level since 2002. These numbers are higher than the soft market loss ratios of the mid-50s, but it remains to be seen if these are appropriate in the new normal of social inflation.

Thirdly, Q1 data also allows us to look at annual premium numbers for the first time for several long-tail casualty lines. This data shows that E&O and cyber premiums declined year-over-year while others are likely in need of rate.

We discuss these points in detail below.

Firstly, overall general liability loss ratios ticked up sequentially

The data below shows that the Q1 2024 general liability loss ratio was 57.8%, continuing the upward loss ratio trend seen over the past few years. However, this is still slightly lower than the most recent peak of 58.1% in Q1 2021.

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The table below shows the top general liability writers over time. Numbers reflect the increase in premiums over time, with the market effectively doubling over the past decade.

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The chart below shows Q1 loss ratios for the top carriers and is a mixed bag when comparing numbers over the first quarter. Note that reserving posture will change as the year progresses, and six months, nine months, and full-years might reflect this shift, so we would refrain from generalizing that one carrier is better than another.

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However, the question remains whether the market has grown materially over time and if the loss ratios appropriately reflect the shift in the loss trends.

Secondly, other liability loss ratios are at their highest levels since 2002 – but is it enough?

The chart below reflects the loss ratios for other, product, and commercial multi-peril liability. CMP is a mixed line that demonstrates the impact of short-tail property losses. Hence, we can see the decline to 52% for Q1 2024 since we had lower losses than the prior year. The product liability numbers reflect some stability in recent years vs historical trends where this segment faced several significant losses, including in asbestos, silicone implants and talc.

However, other liability, where most of the industry’s problems lie, showed an uptick sequentially, with loss ratios at the highest level since the early 2000s. Still, it might not be enough, based on our prior reserve analysis.

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From 2023 on, statutory filings have started to include more details on several business lines that help us better understand the need for additional rates. These are lagged and presented below. For instance, we have heard about pressure in D&O and cyber lines, and the numbers in the chart below confirm that trend.

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Taking a step back, these lines might need continued vigilance regarding rate adequacy and loss cost trends.

In summary, first-quarter loss ratios for general liability show a modest uptick compared to prior years. Within general liability, other liability showed the highest level reached in as much as 20 years. But even these modestly higher loss picks may not be sufficient if loss trends continue to deteriorate.

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