As expected, 2023 proved to be another year of high demand for captive insurance. Healthcare costs, nuclear verdicts, cyberattacks, catastrophic climate events, and market-specific drivers are leading to steep commercial insurance premiums, prohibitive exclusions, and even complete lack of insurability as reinsurance decreases.
Overall, higher premiums and increased investment returns have helped insurers improve their long-term outlook. However, several trends continue to spur uncertainty in the casualty market. For example, in the second year of post-pandemic court activity, we are seeing increasingly large settlements. Carriers find it difficult to predict losses and price coverage appropriately. Pricing is now more complicated and subject to frequent changes.
The cyber landscape continues to evolve rapidly. While capacity remains, ransomware attacks are resurging, raising insurers’ concerns. Organizations with strong security controls are seeing stable rates; however, those with average to weak controls may experience rate increases.
Rising environmental claims such as indoor air quality, legionella, and redevelopment are driving up costs for the real estate and healthcare sectors. Additionally, social inflation is contributing to higher settlement expenses for environmental claims. The U.S. President administration's focus on stricter environmental regulations reflects how environmental priorities change based on who is in office at the federal, state, and local levels. Prepare for any potential financial impacts if you are operating with environmental liability.