By Michael Loney

March 10 - (The Insurer) - The U.S. casualty market must adapt to meet the needs of buyers, who are frustrated with the exclusions carriers have forced through, according to Risk Strategies' national casualty practice leader Mike Vitulli.

Speaking on a state of the market panel at Zywave’s Casualty Insights Conference in New York on March 6, Vitulli highlighted the numerous exclusions that casualty underwriters have brought in.

“Those of us who have been casualty broking for the last 30 years, we've seen exclusions for mold. We had COVID, now we're going to exclude communicable disease. We've had exclusions for everything on a building site that you could possibly think of.

“If I'm the client, the buyer, I say, ‘Where does it stop? Where does my GL policy start to actually cover what's impacting my business?’ It's easy for me to say because it's not my money, it's your money, but the clients are looking at this thing (and saying), what's left here? You've sliced and diced the policy a million ways to Sunday. We've got nothing left here except for the slip and fall, which, by the way, will cost us $25 million now. Where does it end?”

Vitulli said that this means clients have to build business models knowing they will not have protection for certain exposures, as well as potentially investing in loss control methods.

The executive also suggested the casualty market will need to make more changes to adapt to the challenging market conditions.

Vitulli characterised the casualty market as “exhausting”, highlighting the big effort it takes to get deals done.

“(Insurers) have to take an exhaustive approach to underwriting, we recognize that, we understand it, but clients can sometimes be frustrated,” he said.

The reduced limits that carriers have forced through in recent years mean there are more carriers on towers and it can be harder to complete placements.

“Can we buy $100 million the way we did before, or is it going to look different? Let's not forget, London does it a little differently. You can align so you can get 20 insurers to sign up on a percentage basis. Maybe there are things we can do like that,” he said.

Vitulli continued: “We haven't talked about aggregating auto liability. I know that's a crazy idea, but why is auto unaggregated? Should we be considering claims made forms? There's all sorts of things that the market hasn't done.”

Another suggestion Vitulli made was to “ease the excess liability crisis” by having clients take a portion of the risk all the way up the tower if they are comfortable with that.

Moderating the session, Glen Curley, EVP, head of excess casualty at Nationwide, who is retiring this month, said there is a lot of uncertainty and complexity in the market that is not going to go away.

“As I leave the industry, we've got to collaborate and align together to figure out solutions to all of these issues, because otherwise buyers are going to seek alternative mechanisms. I'm not sure what those will look like, but some of them are available now because [buyers] are the ones that need the emergency capital and that need the protection.”

“So that balance has to be found.”

On the same panel, Kristyn Smallcombe, national casualty director at CRC Group, said a concern is bringing in talent to the casualty market and preparing it quickly enough.

“We worry about claims handling as well. We focus so much on the front end and the deal and the structuring and the pricing and the market, but what's going on in the back end is critical as anything. And during the COVID years, certainly as we saw some slowdown, we saw carriers reduce claims handling force based on case management loads.

“And now that has come back, and I think that is an area that we need to continue to focus on,” she said.

Michael Ward, senior vice president and CUO of E&S casualty at Arch Insurance, said that talent is also an issue for underwriters.

“In 2019 we had 25,000 submissions and last year we had 47,000, so somewhere under double. But we did not double our staff in that time. And there was in that time period a talent war. I think we came out better than many, but the talent consideration is a big one,” he said.

Ward suggested the industry will need to rely more on AI and data analytics to work through submissions in the future.

As this publication previously reported, the speakers on the panel also suggested that the casualty market remains in a protracted period of rising rates although there is differentiation by segment that is providing opportunities.