Umbrella/Excess Liability Discontent in the world is spilling into the jury pool, leading to extreme out-of-court settlements. The market for Umbrella and Excess Liability continues to face challenging dynamics and rate pressure. Umbrella policies in particular present significant hurdles in building and completing casualty programs by the effective date. Typically, the Umbrella is the lowest layer in the tower and presents significant multi-million dollar claims to insurers. When small blocks of capacity are at play, insurers are not defending as they should. With the more recent tower model and smaller blocks of capacity, insurers tend to tender limit and/or settle. Historically, blocks of 25M to 50M were at play and insurers would defend vigorously. Insurers are now focusing on offering controlled line sizes to manage capacity. Social inflation is a primary driver of adverse loss reserve development for commercial liability lines. Several factors contribute to social inflation, such as negative public sentiment towards large corporations, increased third-party litigation funding, legal advertising and large nuclear verdicts. While actuaries depend on historical loss patterns to estimate unpaid liabilities, and economic inflation introduces estimation challenges within a predictable range, social inflation poses a more significant threat. Large nuclear verdicts establish precedents that encourage plaintiffs in other open claims to demand similar awards, potentially rendering existing reserves inadequate. Four London insurers closed their doors in 2024, and new capacity is limited. Excess insurers that were highly competitive in 2024, writing at lower attachments, have now increased their attachment to 25M and will only offer 10M in capacity in the first 100M. Concerns of offering capacity with the first 50M remain increasingly high as insurers deem this as the burn layer due to the rise of nuclear verdicts. Our Recommendations: › When building excess of the lead Umbrella, seek larger line sizes as they tend to arbitrate, which is preferred. › Invite new capacity into marketing efforts. This will not only offer the most leverage but also promote stability in terms of additional appetite and staying power. › Insureds are encouraged to take higher attachments on complex programs. High hazard/challenged classes of business can expect 10% to 15% increases; moderate to low hazard should expect 5% to 10%.
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