20241017PAC to Staff 97-2 Attachment - Alliant 2024 Start of Year Report - Insurance Marketplace Insights and Observa.pdf

THE 2024 START OF YEAR REPORT
INSURANCE MARKETPLACE
INSIGHTS AND OBSERVATIONS
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INTRODUCTION WHAT'S INSIDE
The Insurance Marketplace Insights and Observations is the fifth state of the insurance MARKET TRENDS BYPRODUCT LINE. . 4 INDUSTRY PERSPECTIVES . . . . . . . . . . . . . . . . . 26
market report produced by Alliant. The observations and commentary are gleaned from Alternative Risk Financing 6 Agribusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
our industry-specific broking teams, in their own Words, and are intended to reflect their
Aviation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Aviation , , , , . . . . . . , , , . . . . . . , , , . . . . . . , , , . . . . . . , , , , . 30
individuality and Ways of looking at their respective markets.
Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Construction &Surety. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Navigating the challenging and ever-changing market As a result of the pressure, we expect from the market, Cyber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Financial Institutions . . . . . . , , , . . . . . . , , , . . . . . . , , , . . 35
requires a strategic plan within risk management we have included a special and now regular section
departments. Some tips for Risk Managers to consider. to our report on Alternative Risk programs that could Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Forestry, , , , . . . . . . , , , . . . . . . , , , . . . . . . , , , . . . . . . , , , , . 37
present viable solutions to clients looking for alternatives
• Begin renewal discussions early with underwriters and to traditional insurance. Financial Institutions . . . . . . . . . . . . . . . 14 Healthcare . . . . . . . . . . . . . . . . . . . . . . . . 38
share details about your risk management organization,
culture, and processes. As we observe and experience any significant changes Forestry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Life Sciences. . . . . , , , . . . . . . , , , . . . . . . , , , . . . . . . , , , , . 39
• Endeavor to be organized and prepared. in cost and capacity,we will also from time to time Healthcare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Public Entity 41
produce updated versions of the trend report to make
• Start early on the renewal process. clients aware of changing market conditions real-time. Life Sciences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Real Estate & Hospitality . . , , , . . . . . . , , , . . . . . . , , , . . 46
• Stand ready to provide more detailed exposure Alliant. The More Rewarding Way to Manage Risk. Management& Professional. . . . . . . . . . . . . . . . . . 18
information than has been requested or required
in prior years. Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Real Estate & Hospitality. . . . . . . . . . . . . . . . . . . . . . 25
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MARKET TRENDS BY PRODUCT LINE MARKET TRENDS BY PRODUCT LINE
PRODUCT LINE RETENTIONS COVERAGE PRODUCT LINE PRICING CAPACITY RETENTIONS COVERAGE
PROP
im 2EEW_
Challenged Exposures A /► /► /► Corporate A /► t► /►
Non-Challenged Exposures A /► /► /► Charter A /► A V
Standalone Earthquake A V /► V Owner-Flown A /► A V
Builder's Risk(Project Specific)` A /► A V Commercial A A A /►
Builder's Risk(Renewable Programs)` A /► A V Airports/Municipality V /► A /►
Stock Throughput(Life Sciences) /► A /► /► Products&Completed Operations /► A /► A
Aviation General Liability A V /► V
General Liability /► /► /► V Unmanned Aerial Vehicles (UAS) V A A A
Automobile Liability A V A /► LIFE SCIENCES min,
Workers' Compensation V /► /► /► Product Liability V A /► /►
Umbrella Liability /► /► /► /► E&O Liability tl A /► /►
Excess Liability /► t► t► t►
Project-Specific/CIPS' A /► /► V Color Key:As a buyer, is that movement positive, Arrow Key:What direction are pricing, capacity, limits,
neutral, or something that could present a challenge deductibles, and coverage moving?
Subcontractor Default" /► /► 1► during my renewal? Increasing
Pollution Liability` /► /► /► V Positive Change M Stabilizing/No Change/►
MANAGEMENT & PROFESSIONAL Neutral/No Change Decreasing
Potential Challenge
Cyber V A /► /►
Directors &Officers Liability V A V /►
Employment Practices Liability /► /► /► /►
Fiduciary A /► A /►
Fidelity/Crime /► /► /► /►
Representations &Warranties V A V /►
Professional Liability` A /► /► V Alliant note and disclaimer:This document is designed to provide general information and guidance.Please note that prior to implementation your
Legal counsel should review all details or policy information.Alliant Insurance Services does not provide legal advice or legal opinions.If a legal opinion
*Denotes Construction-Specific Product Line is needed,please seek the services of your own legal advisor or ask Alliant Insurance Services for a referral.This document is provided on an"as is"
basis without any warranty of any kind.Alliant Insurance Services denies any liability for any loss or damage from reliance on this document.
©2024 Alliant Insurance Services,Inc.All rights reserved.
4 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 15

ALTERNATIVE RISK FINANCING ALTERNATIVE RISK FINANCING
CAPTIVES — PURE (ONE OWNER) INTEGRATED AGGREGATES, REINSURANCE AND STRUCTURED PROGRAMS
Capacity is driven by capitalization of a pure captive and a pure captive does not inherently There is a continued need to push more capital behind these programs as they are
transfer risk outside the organization.A pure captive can provide access to ART and reinsurance integral to risk financing as the industry moves forward in the coming years. Markets have
CAPACITY " markets. Not all domiciles have reported, but captive demand remains strong.AM Best significantly pulled back on integrated aggregate programs.Structured programs,which
has reported strong reinsurer results which has translated into moderate improvement in typically fit well into the low frequency, high severity risks(property risks), have seen some
reinsurance capacity for captives. CAPACITY - pullback which is in step with the rest of the property market all while we are seeing.
increased interest in such programs from insureds with a strategic appetite for risk.Captive
With the state of the property market in particular, captives are seeking more solutions to reinsurance has seen a tick up in capacity, however, as AM Best points out there is still
increased retentions, increased pricing, decreased capacity and in some cases an inability significant undeployed capital.Another item we are watching very closely is the INSURE
COVERAGE - to find any limit for harder to place risks(CAT). Pure captives can directly write any commercial Act in Congress which proposes targeted federal CAT reinsurance, potentially backed by
line of insurance and can reinsure any insurance, all subject to regulation of the specific CAT bonds,which could utilize capacity limiting deployment to other ILS transactions.
domicile of the pure captive. Direct captive policy forms can be customized.
Integrated aggregate and reinsurance programs focus on more predictable casualty
Pure captive retentions are driven by capitalization of the pure captive, in coordination with lines and try to steer away from volatile lines and CAT exposures.The markets providing
retention optimization of lines on renewal, an overall risk financing strategy and organizational COVERAGE " structured programs are less averse to the more difficult risks, however any programs
RETENTIONS " needs.We are seeing an increase in retentions,as we are not seeing material moderation in will be designed with material retentions and premiums commensurate with the risk.
traditional insurance pricing, however alternative structures have allowed insurers to increase
their retained risk with a higher-level protection. Programs are facing increases in retentions that are permeating the rest of the industry.
-
RETENTIONS However, good risks can find a bit more amenable playing field.
Premium pricing for a pure captive is calculated based on an actuarial determination of
PRICING " expected losses of the insured.The pricing may be indicative of market pricing but may provide Integrated aggregate, reinsurance and structured programs usually have higher attachment
an opportunity for an insured to"bet on themselves"into the future.While there has been points and are designed to protect against the infrequent"adverse"event.Captive reinsurance
improved reinsurance capacity, there has not been corresponding pricing improvement. premiums previously demonstrated some level of increase; however,they did not mirror the
PRICING - increases seen on the treaty reinsurance side. Increased capacity in the reinsurance structure
has not resulted in meaning premium pricing relief.Structured programs are underwritten and
priced individually,and there are increases in pricing due to the nature of risk being closely tied
CAPTIVES — GROUP (MULTIPLE OWNERS) to property and the increases are expected to continue.
There continues to be growth in the group captive market. However, a group captive includes
risk retention.Group captives'price their premium to target"good"risk-overpriced in the
CAPACITY A marketplace based on historical toss experience.We have seen some increased interest in
group captives for contractors,white industries Like trucking continue to struggle in the
group a -space.
RETENTIONSWhite group captives which can be accessed in the marketplace for nearly any traditional
COVERAGE exposure, many group captives are not homogenous and typically include many insureds.
There is an increasing trend to form more closely held group captives within specific industries
and/or known parties.This allows for greater control and customization of programs.
on the specific group program,the insured's loss experience and the premium cost.
Group captives'typically target"good risk"which can result in a premium savings to the
PRICING traditional market. Insureds having had adverse loss experience may not experience an
expected cost savings and may be assuming more risk.
6 1 AWant Insurance Services, Inc. 2024 Start of Year Report 17

ALTERNATIVE RISK FINANCING AVIATION
INSURANCE-LINKED SECURITIES (ILS)
■A "LOW END" "HIGH END"
The ILS, particularly CAT bond, market resulted in $16.413 of total issuance — beating the Corporate +0% +10% Higher Limits
2021 record by nearly$2.5B.The spreads for investors continue to increase,which is good for
CAPACITY
- investors and attracting capital.Scale is highly relevant for most insureds considering accessing Charter +10% +15%
the ILS markets — entry cost, minimum premiums, finite and binary nature of the transactions
all contribute to the need for larger programs. However,with capital continuing to be available Owner-Flown +1d +15%
and attracted, this could result in increased accessibility by corporate insureds.The markets Standard Limits Higher Limits
need to continue to develop.
Commercial
(Utility/External Load Helicopters, Heli-Skiing, EMS, ENG,
With a record$15B in 144A property CAT bond issuance and the first ever 144A cyber-CAT Power Line Patrol, Chemical Spraying, Flightseeing/Tours, +10% +15%
COVERAGE " bonds, the increase in capital to the sector is allowing it to develop from a coverage and Firefighting,Alaska-Based, Over-Water/Off-Shore and
structure standpoint.The industry needs to continue pressing its needs for more creativity Search and Rescue Businesses)
to develop in the ILS space.
Airports/Municipality -10% +5%
Retentions are going to be determined at the insured level prior to any ILS transaction.
RETENTIONS " However, a higher retention by an insured could lead to a more marketable ILS issuance +5%
and improve pricing. Products and Completed Operations(PCO)/Commercial +0% +25%+
General Liability(CGU +10% (CGL Loss Sensitive on
PRICING - Due to increases in reinsurance and still high interest rates, spreads on ILS are at record Severity& Frequency)
highs.While this is good to continue attracting capital, it means the costs of ILS for insureds Drones/eVTOLs(Unmanned Aerial Vehicles) 0% +2.5%
will continue to increase.
Helicopters +5% +10%
PARAMETRIC PROGRAMS
The CAPACITY
" Is stabilizing but reinsurance treaties will eventually impact the market with increased
parametric programmarketcontinues o develop, alongside improvements _ cost for protection.The Russia/Ukraine situation will not become a factor until 2025.
CAPACITY A and new entrants to the market looking to "disrupt." However, overall capacity continues
to be towon - "perdeal"basis and parametricprograms • in more of acashWar risk will be capped/aggregated and must be purchased separately in the market.
"expeditious"
• • primary or
deductible
• • buydown
position
• • on
larger
• programs.
•• COVERAGE " Minimal reprieve on lost or reduced ancillary coverages now with some exceptions.
Non-Pro/Owner Flown pilots are still encountering pushback/obstacles in the market.
Parametric programs expanded from ' "' windstorm, quake andwildfireHelicopters remain a tough business segment regardless of use.
COVERAGE covers to include hail, rainfall, drought,water level,wind yield loss, crop yield, frost, and
•a programs(tem•" a • • of " programs will be Are stabilizing unless attritional losses dictate otherwise. Underwriters are focused on
utilizedin conjunctioncaptive for ' other ' related policies. RETENTIONS - earned premium dollars rather than self-insured retention and deductible options. Drones
are seeing an increase in deductible on higher insured values of ten to fifteen percent.
RETENTIONSThere has not been significant pressure to increase retentions on parametric programs,
• _ many such programs are tail• •" • it is a bit more challenging to quantify Moderate increases will prevail for the balance of 2024. March 15t, 2024,will start a new
retentionpressure. PRICING trend of 5% increases due to ongoing reinsurance pressures that take on renewals in
01 and Q2 of 2024.
Parametric programs are unique by transaction and are priced that way. However,we saw
PRICING claims paid in 2023.White this is good from a market credibility standpoint, it is Likely to
result in pricing
8 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 19

CASUALTY CASUALTY
RATE TRENDS • Capacity is available for less complex risks. New insurer capacity entering the market is
slowing down from the two prior years. Capacity is still constrained for difficult risks.
General Liability 0% 10% CAPACITY "
Auto liability capacity is extremely limited due to rising claim frequency&severity,
Automobile Liability 5% 30% coupled with an uptick in Hired and Non-owned (delivery operations) losses. More
insurers will restrict capacity or exit the marketplace, particularly in California and Florida.
Workers'Compensation -5% 5%
Increased focus on clarifying or excluding chemicals, with Perfluoro Octane Sulfonic Acid
Umbrella Liability 0% +15% and Per and Polyfluoroalkyl Substance(PFOS/PFAS)exclusions are being automatically
COVERAGE - attached to most accounts irrelevant to class. Biometric Information underwriting questions
Excess Liability 0% +10% are being asked and exclusions added due to the increase in mass tort litigation. Continued
increase in Abuse&Molestation,Assault& Battery, and wildfire exclusions. Per location
Project-specific/CIPs' 5% 40% coverage is Limited, and territory restrictions due to various global conflicts will continue.
Subcontractor Default` Flat 10% ESG/climate risk concerns continue to be on the rise, which may impact insurer
underwriting decisions.
Pollution Liability(Contractor's&Site Liability) Flat 10%
RETENTIONS " Retentions remain flat, however, attachment points should be analyzed and adjusted,
Denotes Construction-Specific Product Line if necessary, to ensure you are designing the optimally priced and structured program.
Retention is linked to risk profile and type of risk, with loss history playing a key role
in selection.
Third party litigation funding, social inflation, mass torts/class actions, nuclear verdicts,
judgements for noneconomic damages (pain and suffering)and reinsurance charges
are adding to claim cost volatility. Markets are concerned over rate adequacy and
depletion of surplus.Although material rate changes have not been market sweeping,
we anticipate the market remaining firm for Auto Liability(AL) and increasingly for
General Liability(GU.
Auto liability, especially fleets with heavy autos and poor loss experience will be
forced to bear the greatest rate increases and evaluate adequacy of retentions.
GL specific to premises exposures such as wildfire, high-hazard industries, tough
PRICING A products exposures, and habitational real estate will experience pricing pressures.
Workers Compensation remains the most consistent profit generator for insurers.
The market will remain competitive and stable for most classes,whether written on
a guaranteed cost or loss sensitive basis.
There is some caution built into the pricing of Umbrella (limited insurer competition)and
Excess (more competition) business as loss costs and loss development continue to rise.
Insurers continue to invest in data, analytics, and Al to gain competitive advantages.
The quantifiable business impact they are seeking to achieve remains to be determined.
10 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 111

CYBER ENVIRONMENTAL
(SITE POLLUTION — PLL AND CONTRACTORS POLLUTION — CPU
■A "LOW END" "HIGH END"
Cyber 10% 15% Although there have been some changes in leadership at several environmental insurers/
CAPACITY A divisions of insurers offering this line of coverage, and some new entrants, on balance the
overall market capacity relative to domestic capacity has not materially changed.
Given recent loss history, uncertainty around regulatory scrutiny/standards for PFAS,
Insurers continue to offer$10MM+for good risks.Total capacity,while not yet at pre-pandemic redevelopment exposures and corporate attention to ESG considerations, carriers are
Levels, is creeping back up and any one risk can obtain $400MM+. COVERAGE - vigilant towards new submissions and exclusions/term limitations are on the rise. 10-year
terms for redevelopment projects are decreasing in availability.There no Longer is a market
Certain industries(Energy, Manufacturing, Critical Infrastructure and Public Entity)are still " p p J g Y g
CAPACITY considered elevated risk and are monitored more closely than others.As a result, these for cost-cap/remediation stop loss. On the other hand, carriers continue to grow appetites
industries may not be able to obtain as much limit. for contractors' pollution, contractors' pollution + professional and combined general
liability+site pollution.
MGAs continue to enter the cyber market, typically focused on small-and-medium
sized enterprises. Remain unchanged. $25,000 is no longer widely seen... $50,000 and $100,000
RETENTIONS " (depending on the exposure/risk) is more common.The premium price break is not
Incumbents are willing to improve certain coverages and policy wording,while reducing significant between these retentions.
premiums, to retain business.
" low-end
Coverage terms are improving for qualified risks; Increases for sub-limits in Social Engineering, PRICING Year-over-year pricing is neutral to unchanged.At the carriers are offering flat
Business Interruption, and Hardware Replacement are possible for companies with strong renewals to a high end of 10%-15% increases,
COVERAGE " cyber resilience.
Exclusions around Catastrophic and Systemic Risk along with more defined as well as specific
Language around website tracking (e,g., MetaPixeL)and wrongful collection will be a focus
for many insurers this year.
War Exclusions continue to be added to new and renewal business both domestically and
in London, although application remains inconsistent in the U.S.
Most insurers are not pushing for higher retentions. Lower retention options may be available
RETENTIONS " for additional premium.
Underwriters determine retention based on revenue, industry, controls, and loss history.
Pricing has stabilized, is down slightly for companies with good controls, no losses, and
comprehensive submissions.
Some MGAs have noted expected increases this year, given claims activity in the market,
PRICING " though most increases are expected to come in under 10%.
Excess pricing is generating more competition; ILFs more consistently in the low 70% range
on excess towers.
Pricing continues to vary based on controls, loss experience, and by insurer.
12 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 113

FINANCIAL INSTITUTIONS FORESTRY
PRIMARY MARKET APPETITE VIABLE PRIMARY MARKETS
CASUALTY
Mutual Fund and Investment Adviser Strong 10+ Capacity including coverage for wildfire and logger's broad form property damage
Long/Short Equity Hedge Funds Strong 10+ CAPACITY 141110.
continues to be scarce.There are very few domestic retail insurers willing to write forest
products accounts.We continue to have support from the wholesale and London
Multi Strategy Hedge Funds Moderate 5-10 Marketplace as well as interest from Bermuda.
Private Equity Funds Moderate 5-10 Underwriters are continuing to push for Wildfire exclusions and no logger's broad
form.Additionally, on all casualty renewals insurers are attaching exclusions for Lead,
Community Banks< $25 Billion in Assets Moderate 5-10 COVERAGE -
Perfluorinated Chemicals or PFCs("forever chemicals"), Biological Agents/Fungus,
Insurance Companies Moderate 5-7 Total Pollution and adding restrictive Silica/Mixed Dust language,
FinTech Moderate 5-7 RETENTIONS " Retentions remain unchanged except for clients with poor loss histories. Clients receive
Regional Banks>$25 Billion in Assets Low 5-7 no rate credit on the casualty side for taking higher retentions.
Mortgage Originators, Servicers, REITS Low Less than 5 Pricing continues to be up but not as dramatically as the past few years. General Liability
PRICING A rates are ranging from 3-5%,Auto 8-10%and Umbrella/Excess are+10-15%for the entire
Broker Dealers Low Less than 5
excess tower.
Crypto Low Less than 5
SPACs Low Less than 5
PROPERTY
The retraction in available global market capacity for Forest Products continued throughout
Anticipate that primary and excess insurance capacity will remain robust,yet stable in 2024. CAPACITY -" 2023, led by domestic insurers either reducing deployed line sizes or exiting the Class
CAPACITY Current market capacity levels likely mean there will be displacement of some excess entirely due to industry losses.The London market remains a robust supporter of Forest
layer incumbents. Products renewal business with Lloyds typically writing majority share of working layers.
Changes to terms and conditions remain top-of-mind for insurers to maintain their market Underwriters appear to have established a comfort level in the policy form languages that
share as pricing (see below)starts to moderate in 2024, are currently in force, as significant changes to terms were not the norm in 2023. However,
COVERAGE " where Insureds are unable to satisfy underwriter's need for quantification of renewal
COVERAGE - For Financial Institutions, the focus for underwriters'willingness to broaden coverage will exposures, the imposition of new Margin Clauses may still be imposed on a case by
be external factors impacting client-specific exposures, e.g„ impact of regulatory actions case basis.
on the sector(Cyber disclosure, ESG)as well as usage of Al, industry M&A, and even
reputational risk. Base policy deductibles remaining unchanged for accounts with favorable loss experience.
RETENTIONS " However, fringe deductibles that are traditionally much smaller that the base deductible are
Underwriters seem to have paused their pursuit of higher self-insured retention amounts seeing upward pressure.
RETENTIONS " across most products and industry classes —the exception being Employment Practices
Liability claims involving high wage earners and Fiduciary Liability claims involving fees Following multiple renewal cycles of large rate increases, numerous buyers in 2023 opted
and proprietary funds. to self-insure specific layer/participations where individual insurer pricing was beyond the
PRICING - balance of the market.This behavior could signal the exceedingly early signs of a reversing
Pricing expectations are that 2023 new market entrants and aggressive insurer budget market cycle.With a reinsurance marketplace outlook that is forecasting more premium
targets will result in continued pricing decreases for good risks with clean claims histories. stability for insureds in 2024,there is optimism that the rate at which premiums are increasing
PRICING - will begin to slow.
Retaining business for incumbents will be the largest challenge this year— and pricing is
the proverbial low-hanging fruit and first line of defense in maintaining position as primary
or excess for client programs.
14 1 AWant Insurance Services, Inc. 2024 Start of Year Report 115

HEALTHCARE LIFE SCIENCES
■A • ■A "LOW END" "HIGH END"
Primary HPL— Hospital Health System 5% 15% Product Liability -15% 5%
Excess HPL— Hospital Health System 5% 20% E&O Liability -5% 5%
Allied Health 3% 10%
Physicians 3% 10%
Senior Care— Skilled Nursing Facilities 0% +20% CAPACITY - Market growth has increased overall capacity.
Insurers continue to limit their per risk capacity.
Insurers are further limiting their exposure to potential mass tort situations(e.g., opioid,
Insurers continue to limit HPL/excess capacity, but new market entrants have offset limit COVERAGE " weight loss drugs).
CAPACITY " restrictions. Some markets have withdrawn or taken a more conservative approach for Insurers seeking market share more likely to be flexible.
Children's hospitals. However, there is adequate capacity to complete the excess towers
for all lines of insurance for most healthcare systems. RETENTIONS - Competitive market providing opportunity for decreases.
Insurers continue to express concern on claims alleging sexual misconduct, but insureds Competitive market continues to offer rate reductions.
COVERAGE " can avoid absolute exclusions with a robust reporting and compliance process. PRICING p
The increasing frequency of nuclear judgements and settlements is increasing the working
RETENTIONS - layer of expected loss and resulting in some excess carriers requiring higher underlying
retentions to bind and quote coverage.Auto liability underlying attachment points are being
monitored by excess markets.
PRICING - Rate trends are up for HPL and excess liability due, in part, to the continued emergence of
multiple nuclear verdicts(those excess of$10M)and high life care plans.
16 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 117

MANAGEMENT & PROFESSIONAL MANAGEMENT & PROFESSIONAL
CONTRACTOR'S PROTECTIVE PROFESSIONAL LIABILITY REPRESENTATIONS & WARRANTIES
There are-30 carriers that write CPRL with varying levels of target appetite and most having M&A activity remains historically love,with total deal value not hitting $3T for the first time
at least$10M in limits available, since 2013 according to most sources.This slowing is driven by lingering concerns over
high interest rates, geopolitical events, and potential headwinds in the overall economy.
Several carriers with sizable capacity are selectively releasing and are reserving CAPACITY A While both new entrants and hiring by existing insurers have slowed over the course
CAPACITY
- Project-Specific capacity only for existing insureds. of 2023, there remains significantly more capacity in the market than there are deals to
" There have been several new entries into the market and one exit over the past few months, Underwrite, and yet this is still set against a claims backdrop whereby more claims were
made, and paid, over the past 24 months.
Residential'for-sale'construction in Southeast remains the most challenging for capacity
and market appetite. In light of the increased competition for deals against a still depressed M&A market, coupled
with brokers'consistent advocacy, insurers continue to seek differentiation in their terms by
Structural, geotechnical, process-engineering, and large civil projects inclusive of bridge limiting deal-specific exclusions and purchase agreement commentary,as well as loosening
work are challenging capacity. COVERAGE " underwriting in industry and asset classes that historically have been out of appetite for
certain carriers(e.g., healthcare, subsets of energy, and financial services — including
Deeper underwriting review on non-traditional delivery methods, especially for Rectification/ insurance companies and fintech),
Mitigation Coverages on large scale projects requesting multiple parties be insured on one
policy, continues to be a challenge. Increased competition has continued its downward pressure on retentions as insurers'
COVERAGE " Depending on risk factors, some coverage parts are being sub limited whereas in the past efforts to win new business intensify. It is now universal that sub-1% retentions are available
full policy limits were available. RETENTIONS - on all deals, regardless of size(some going as low as 0.5%)and industry class, broadly
speaking. It remains to be seen what will happen to retentions— particularly on smaller
However, no real material change to coverage terms and conditions is expected deals —when M&A activity rebounds.
across market.
Although pricing has continued to soften, the rate at which it has done so has decelerated
Retentions remain in a similar pattern (flat)for Middle Market risks. and it is anticipated that rates will bottom out at around +2.5%, absent a sustained and
PRICING - meaningful rebound in M&A activity,The rate bump typically seen in the fourth quarter
- Larger insureds are electing higher retentions to lower premium.RETENTIONS did not materialize in 2023 given the typicalyear-end M&A surge was not significant
" Higher attachment points expected on Project-Specific policies for large projects. enough to offset excess capacity.
Retentions for insureds with losses are pushed higher by underwriting guidelines,
The new"flat"for insureds with clean loss history is a 0-5% rate increase.
Insureds with material changes to delivery methods, project mix, or geography in
PRICING - year-over-year review could assume 5-9% rate increases, even with no losses.
Insureds with losses could assume 10-25% rate increases.
Market competition should create cost savings on renewals and offer some rate relief.
18 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 119

MANAGEMENT & PROFESSIONAL MANAGEMENT & PROFESSIONAL
DIRECTOR & OFFICER LIABILITY
CAPACITY ALContinued increase in competition, particularly on excess and Side A.
Insurer Restrictions Based on select business classes and/or claims experience continue. PUBLIC COMPANY
Coverage Remains Broad and Consistent on Private and Non-Profit D&O policies.
COVERAGE " Restricted Coverage for Negative Loss Experience&Financially Distressed Risks. CAPACITY - Competition remains vibrant, especially for excess positions in layered programs. Carriers
Retention levels remaining consistent in 2024 for similar risk profiles year over year. are hinting at an end to price reductions but that has not been realized yet.
Carriers are improving coverage on the margins of existing forms and products. Certain,
RETENTIONS
" Client's growth will be largest factor in maintaining existing retentions, COVERAGE " newer forms are expected on the market soon which will expand hove D&O insurance can
Carriers continuing to apply higher retentions for mass/class actions and Anti-Trust Claims. respond to claims.
Primary pricing improving with rates averaging between flat and 5%. RETENTIONS " Carriers continue to try and balance limits deployed against retention. Carriers interested
PRICING -
Excess pricing remains highly competitive. in new primary opportunities are offering lower retentions to try and win market share,
Market for public D&O continued to see lower prices for renewals throughout 2023.
PRICING V Multilayered programs saw the largest decreases,with smaller-sized towers modest
(i.e., single-digit)decreases.
PRIVATE COMPANY . AND NONPROFIT
FINANCIAL INSTITUTIONS
Primary Insurers Continue to Expand Appetites in most industry classes.
CAPACITY " Insurer Restrictions Based on select business classes and/or claims experience continue. MARKET UPDATE
Market Capacity for Excess remains flush.
Minor Decrease in Underwriter Scrutiny& Information Requirements.
Anticipate that primary and excess insurance capacity will remain robust,yet stable in 2024.
Coverage Remains Broad and Consistent on D&O/EPL/Fiduciary/Crime Insurance Programs. CAPACITY " Current market capacity levels likely means there will be displacement of some excess
COVERAGE " Restrictions in coverage are limited to those risks facing unique exposures(such as bankruptcy, layer incumbents.
anti-trust, specific geographic international operations, and certain professional services).
Changes to terms and conditions remain top-of-mind for carriers to maintain their market
Restricted Coverage for Negative Loss Experience&Financially Distressed Risks. share as pricing (see below)starts to moderate in 2024.
In most cases, retention levels are remaining consistent in 2024 for similar risk profiles COVERAGE For Financial Institutions, the focus for underwriters'willingness to broaden coverage will
year over year. Certain adjustments are being made depending on growth, debt position, be external factors impacting client-specific exposures, e.g., impact of regulatory actions
industry class, and claims experience, on the sector(Cyber disclosure, ESG)as well as usage of Al, industry M&A, and even
" Many insurers have begun to apply specific, higher EPL retentions to claims brought by reputational risk.
RETENTIONS employees whose total annual compensation exceeds a specific dollar amount(generally
Underwriters seem to have paused their pursuit of higher self-insured retention amounts
$100,000 to$150.000). RETENTIONS " across most products and industry classes —the exception being Employment Practices
Depending on geographic location and employee count, insurers may also utilize specific. Liability claims involving high wage earners and Fiduciary Liability claims involving fees
higher retentions for class action claims or claims brought in a specific state(most commonly and proprietary funds.
CA, NY, NJ).
Expectation that 2023 market entrants and aggressive carrier budget targets will result in
Hard market has subsided, and premiums have stabilized because of carrier competition. continued pricing decreases for good risks with clean claims histories.
PRICING " PRICING Expecting to see renewal premiums closer to flat,with greater pricing competition in Retaining business for incumbents will be the largest challenge this year— and pricing is
marketplace overall. the proverbial low-hanging fruit and first line of defense in maintaining position as primary
Management Liability Program Pricing changes: -5%- +5%. or excess for client programs,
20 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 121

MANAGEMENT & PROFESSIONAL MANAGEMENT & PROFESSIONAL
EMPLOYMENT PRACTICES LIABILITY CRIME
Capacity remains plentiful in the United States and Bermuda following past cutbacks,
CAPACITY PRIVATE COMPANY MANAGEMENT LIABILITY
" although certain jurisdictions remain troublesome for insurers.
400.
Coverage offered remains broad; however, insurers are leery of the potential for In general capacity remains stable.
COVERAGE cutbacks and resultant claims. Some Primary Insurers expanding their Appetite and offering higher limits in some
instances to attract or retain business.
While they have stabilized, certain risks are still seeing upward pressure on retentions.
CAPACITY " Market Capacity for Excess is readily available.
RETENTIONS " The market continues to apply separate retentions for California claims, class actions
and for"highly compensated"employees. Underwriting more flexible as carriers seek to write new accounts; larger more complex
accounts continue to get more scrutiny.
PRICING " Pricing is modestly improving for Insureds.Similarly, to D&O, insurers are cutting rates to
try and win business for existing insureds with favorable track records. Coverage Remains Broad and Consistent for crime in general.
Greater frequency of social engineering claims continues to impact the industry with
COVERAGE " underwriters generally seeking additional underwriting for this exposure; capacity
FIDUCIARY LIABILITY to entertain high limits of social engineering varies significantly
Ability to secure excess social engineering has improved.
CAPACITY Insurers monitoring deployed .p In most cases, retention levels are remaining consistent in 2024 for similar risk profiles
Now Layered programs are built in smallerblocks, adding • year over year.
RETENTIONS " As revenues and complexity of insureds increase underwriters seeking higher retentions.
COVERAGE Coverage is broad� but the application of certain standards of retentions makes accessing
44110.. - • cover a taLLer hurdle. Social engineering retentions may be higher than other retentions depending on the risk
Retentions are now stable for most classes of business as insurers have gone through and limits being offered.
RETENTIONS • cycles of • retentions on • address c• -• exposure • Given the capacity and desire of most underwriters to grow this book we anticipate
excessive fee claims. PRICING " flat pricing for most accounts.
Pricing continues to trend negatively, but • as _ _ _ as • • renewaL years. Insurers Excess capacity being ample excess pricing should be flat or down 5%.
PRICING still view this line as under priced relative to total limits deployed and seek to gain
greater balance.
22 1 AWant Insurance Services, Inc. 2024 Start of Year Report 123

PROPERTY REAL ESTATE & HOSPITALITY
RATE TRENDS • Property capacity is increasing for many real estate risks.
CAT Property with Poor Loss History or Risk Quality 20% >20% Some estimates indicate global Property capacity will increase by 10% in 2024.
CAT Property with Good Loss History or Risk Quality 10% 20%+ CAPACITY AL Accounts in challenged asset classes and/or with poor loss experience may need to make
Non-CAT Property with Poor Loss History or Risk Quality 15% 20%+ concessions about deductibles and program structure to gain interest from the marketplace.
Non-CAT Property with Good Loss History or Risk Quality 5% 10% Brokers and insureds should aggressively market renewals based upon clearly
defined strategies.
1/1/2024 Treaty Renewals were more orderly and stable due to increased availability of capacity. Property coverage remains stable and consistent.
However,treaty underwriters still practiced underwriting discipline.
Casualty risks for certain asset classes and geographies continue to face more
Most insurers are messaging that the re-underwriting of their books is complete, and they will COVERAGE " restrictive coverage(assault& battery, the State of Georgia, etc.).
be looking to maintain line sizes from 2023. Many carriers are reporting an increased appetite
for new business in 2024. It remains critical for non-concurrencies to be identified and fully understood prior
CAPACITY " Difficult geographies(California, Florida,and Texas)should expect to continue to face some to binding.
challenges, particularly those Insureds that have sustained losses in recent years.
There are limited new insurer entrants for 2024 with many experts anticipating a need for at least one Insureds continue to face pressure to accept higher Property deductibles for AOP,water
additional year of profitability before investor capital expands into the Property(re)insurance market. RETENTIONS - damage, flood and/or convective windstorm/hail.
Excess layers on large programs may continue to be toughest to find capacity but should be more Percentage deductible increases for CAT exposures have not materialized to the degree
readily available than in the previous year(s). some anticipated following increases to reinsurance retentions in 2023.
Following years of limit reduction(s)as part of larger book re-underwriting and limited reinsurance
2024 should be a year of Property rate stabilization for many real estate accounts.
capacity, many insurers are not reducing coverage limits for 2024.
On select accounts, natural catastrophe coverage will continue to undergo scrutiny. 440111110.
Casualty rates are stable in most instances.
PRICING
Valuations remain topical all Carriers expect insureds o have a proactive COVERAGE " l f ll Insureds.Ci t f i d t h ti Deductible levels should be measured against loss experience to ensure attritional activity
valuation narrative and philosophy. Ideally, insureds can demonstrate that there is a valuation does not adversely affect renewal pricing, coverage terms, and/or available capacity.
process in place that ensures valuations will continue to be appropriately adjusted over time,
most preferably via a 3'd party appraisal firm.
Without a compelling narrative or adequate valuation metrics, expect carriers to again push for
Occurrence Limit of Liability or Margin Clause provisions(even with valuation increases/trending).
Following years of cat and non-cat deductible increases, many insurers are finally putting less
pressure on retentions.
Exceptions to this include insureds that continue to report attritional loss activity. Insureds will look
" to correct this by increasing All Other Perils retentions,especially for Water Damage,
RETENTIONS
In the same vein, CAT-deductibles which have not been re-underwritten or adjusted recently
will be reviewed.
Severe Convective Storm and Winter Weather losses that hit the industry hard in recent years will
continue to be singled out as perils that could require a separate, increased retention.
Pricing(and more broadly,overall renewal results)will be very dependent upon individual loss
experience, industry class,carriers'viewpoint of the specific account's rate adequacy and changes
that have been implemented at the account level.
PRICING ARate increases will continue to be the norm for 2024,albeit not near the levels we saw in 2023.
Carriers are eager to work with insureds to restructure/layer programs to avoid"trading dollars"
and want to reward those buyers that are making efforts to put more"skin in the game"which
should lead to greater long-term rate and pricing stability.
24 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 125

INDUSTRY PERSPECTIVES
The Insurance Marketplace Insights and Observations is the fifth state of the insurance Agribusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Healthcare. . , , , . . . . . . , , , . . . . . . , , , , . . . . . . , , , . . . 38
market report produced by Alliant. The industry perspectives and commentary are Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Life Sciences. , , . . . . . . , , , , . . . . . , , , , . . . . . . , , , . . . 39
gleaned from our industry-specific broking teams, in their own words, and are intended Construction &Surety. . . . . . . . . . . . . . . . . . . . . . . . . 32 Public Entity. , , , . . . . . . , , , , . . . . . , , , , . . . . . . , , , . . . .41
to reflect their individuality and ways of looking at their respective markets.
Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Real Estate & Hospitality. . . . . . , , , . . . . . . , , , , . . . 46
Forestry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
all
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�' ,• a f '�._ .�:;,. /' A `

AGRIBUSINESS
One of the few bright spots that we have noticed is that Property Insurance
in lower-risk jurisdictions or occupancies, some carriers Continues to see limitations across the board. Insurer
� f' have improved limits, terms, and conditions for better profitability has improved in 2023 and additional
than average risks. capacity is being deployed in comparison to last
i t year's very tough market.
Because of the current market, alternative risk transfer
atr / methods, such as single parent captives, group captives, Overall, the property insurance market is seeing lower
and structured programs continue to be utilized volatilit with rates increasing in single digits. in response
r � Y� g g g� p
effectively.These alternative structures have been past natural catastrophe losses. Brokers should prepare
�- especially attractive for accounts with superior loss property insurance buyers by continuing to address
history and good operational controls. insurance to value and risk engineering recommendations.
' Ak
Liability Insurance Outlook
Overall, the liability insurance market continues to THE AVERAGE ANNUAL COMMERCIAL INSURANCE
_ stabilize from the 2019-2022 rate increases. However, PREMIUM SHOULD SEE RATE INCREASES FROM
insureds must be prepared for the possibility of rate FLAT TO LOW-SINGLE DIGITS FOR NON-CAT
increases and higher retentions as profitability of other EXPOSED CLIENTS TO LOW DOUBLE DIGITS
Lines of insurance affect insurer's ability to compete. FOR CAT EXPOSED LOCATIONS WITH LOW
INDUSTRY ISSUES Every five years, Congress passes legislation that sets INSURANCE TO VALUE RATIOS. INFLATIONARY
national agricultural, nutrition, conservation, and forestry Mid-excess layers are more competitive than they have PRESSURES AND NATURAL CATASTROPHE
The agriculture and food industry continue facing a been in the last 5 five years with some new entrants into
number of challenges,which include:water scarcity, policy through the Farm Bill. In November 2023 Congress LOSSES CONTINUE TO BE THE MAIN DRIVERS
g Y voted to extend the 2018 Farm Bill through September the space. Rates for lead umbrella layers continue to
Labor costs, logistic challenges, rising input costs, and increase as auto losses mount and effective reinsurance OF INCREASES.
environmental issues.Water resources are becoming 2024.This major piece of legislation has major impacts
on farming and the food chain including crop insurance becomes unavailable,The remainder of excess towers
,
increasingly scarce in some regions,which could lead are seeingsingle- digit increases.
to government-imposed caps on water usage for and how those programs are funded. g g Summary
agricultural companies. Insurers continue to earmark Food and Agribusiness
Primary general liability limits have generally increased, property as"high hazard"and a "tough class"due to very
Attachment points for excess programs remain elevated.
In Western United States, the short-term water outlook INDUSTRY OUTLOOK challenging loss history and poor experience in the line.
New capacity entering the market is limited to specialty improved dramatically after record amounts of snow The insurance industry is in the middle of hard-cycle areas. Insurers are increasingly excluding emerging Retentions and attachment points will remain elevated.
and precipitation in many areas in 2023. Reservoirs are especially in property and product liability lines, In the Insurers in some cases are mandating scheduled limits,
liabilities such as PFAS and biometric privacy risks from margin clauses, and/or Co-insurance.
close to full, and the concern has turned from too little to agribusiness space some of the smaller insurance general liability policies.
too much water with mandatory releases causing flood companies and mutuals have severely reduced their
damage to crops and even some towns.This has not capacity or all together have left the space. Implications for Buyers
changed the regulatory regime facing the industry long Buyers of liability insurance will see flat to high-single-
term, forcing major changes in agricultural land use and Additional constraints are evident from carrier rating digit rate increases.Automobile Liability rates will be very
irrigation water decisions.Will the pattern of sustained issues and limited capacity for difficult risks,The industry challenging especially for large fleets and fleets with
drought years continue. is challenged across the board. For example, in property heavy units,with rate increases in the low to mid-teens
placements are now commonly completed through common place. Retentions and attachment points will
Labor costs continue to rise, putting pressure on shared and layered programs even on small-middle- most likely remain elevated. Buyers should consider
agricultural businesses.The global supply chain has market placements.Only a couple of years ago monoline excluding emerging liabilities from their coverage.
normalized since the 2020-2023 headwinds,which has carrier placements were the standard for 99%of our clients.
eased backlogs and made it easier to export agricultural
products and import inputs, parts, and equipment.A key FACULTATIVE REINSURANCE IS NECESSARY ON
environmental issue is if removing dams in Washington,
Oregon, and California could further constrain the ability MOST PLACEMENTS THUS PUTTING PRESSURE
of agricultural businesses to move product by barge. ON CLIENTS TO BETTER UNDERSTAND THEIR
RISKS THROUGH RISK ENGINEERING AND
REGULAR APPRAISALS.
28 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 129

AVIATION
General Aviation is seeing a resurgence in rates, but
recent claims activity has caused pause and reflection
on hove to remain writing in the sector profitably. Insurers
are focused on adequate insured values to be kept in check
during a competitive used and new aircraft market.
Aviation manufacturers, airports, drones, and workers
compensation products continue to be the most
competitively priced Aviation risks, Owner flown
1 turbine aircraft and rotor-wing placements continue
to be the more challenging placements.
While the specialty insurance sector for Aviation is
{ improving,we remain hopeful for conditions to improve
for insureds as competition for profitable business
continues to grow,We await a clearer picture of the
resulting impact of the resurgence in Boeing MAX
groundings, nuclear verdicts/settlements, and
nationalized airline type aircraft in Russia,
INDUSTRY ISSUES Another contributing factor to loss ratios is the rising
As COVID-19 has receded the insurance implications costs for claims management.The market has not
remain. Conditions are improving for Aviation related
addressed this to date, although sources indicate INDUSTRY OUTLOOK
insureds moving into 2024. Beginning in 2020 through that a correction is forthcoming. The aviation insurance market continues to demonstrate
the end of 2023, over thirty-five significant losses were resilience even as technology, socio-economic, political,
categorized as major loss events more than $1M.Several Finally, as inflation increases, it has a nullifying effect and legislative factors continue to change the underlying
awards also exceeded$100M including a recent rotor-wing on profitability.Actuaries are playing a significant role risks facing the aviation industry.
loss settlement with an original equipment manufacturer with most underwriting facilities by assessing risk and
have made a significant impact to the market. exposures, reasonable rates on return, and analytical/ New macroeconomic challenges impacting the
catastrophic modeling. sustainability of the Aviation industry include inflationary
pressures, supply chain issues, and rising interest rates.
REINSURANCE CONTINUES TO BE A POINT OF Each of the major aviation segments, including Airlines, Safety impact will be an area of renewed focus as the
CONTENTION AS MOST AVIATION INSURERS Products Manufacturers/Suppliers, and General Aviation, talent shortage puts pressure on operators with varying
EXPERIENCED 50%-150% INCREASE IN THEIR has unique characteristics that blend to create a very talent levels.
REINSURANCE PROTECTIONS DUE TO POOR dynamic marketplace.
UNDERWRITING RESULTS AND NATURAL THE CHALLENGE REMAINS FOR UNDERWRITERS
DISASTERS HAVING A SIGNIFICANT IMPACT. Trunk carriers(passenger or cargo), regional operators
and charter companies make up the Airlines segment, TO FOLLOW STRINGENT UNDERWRITING
This segment has had one of the safest accident records PROTOCOLS COMBINED WITH DATA AND
Some business sectors are likely to incur greater over the last few years. Despite this, underwriters are ANALYTICS TO BALANCE BUSINESS DECISIONS
increases in their insurance premiums at renewal due barely making a profit due to attritional loss activity, AGAINST THE MARKET NEEDS.
to either attritional loss activity or an uptick in both high which has meant pricing in this segment is not stabilizing.
frequency and high severity loss events.Such segments
include FBO's/Ground Handlers, Commercial Aircraft/ Furthermore, new capacity has entered the market both Clients that outline clear underwriting information, details
i
Helicopter Operators and EVTOL's(Electric Vertical Take domestically in the United States and internationally in d their risk, and consistent safety risk management
Off and Landing). the London Market, putting downward pressure on rates directives are receiving the most competitive rating
and premiums, Negative changes to the loss experience structure as increased capacity levels come into play.
for products manufacturers/suppliers is the result of Have early engagement with your agent on the renewal
billions in losses from aircraft groundings and other process to ensure this is a reality.
frequency events.
30 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 131

CONSTRUCTION & SURETY
/ or CLT)and those exposed to natural disasters may Professional liability carriers are seeing an uptick in the
encounter resistance from the marketplace and be number and severity of rectification claims particularly
subject to more stringent terms and conditions. on infrastructure projects.As federal funds flow into
— this sector clients can expect higher minimum insured
Water damage losses continue to plague the industry and retentions and may experience strained capacity.With
are a major loss driver/challenge to the market. Increased limited players in the space carriers look to reward
water damage deductibles can be anticipated, especially current clients with capacity.
.� on high-rise, residential and wood frame projects.
1 Project extensions continue to be a lagging impact SURETY INDUSTRY ISSUES
from the pandemic. Increased rates and deductibles, in 2023 was a phenomenally successful year for the surety
4W addition to possible restrictions in coverage, are being markets. Premiums were up slightly over the record set
r levied against insureds when extending coverage. in 2022, as the elevated level of construction activity
_�.t► translated into a significant demand for surety bonds.
The builders risk space saw its first ruling with respect Inflation generated significant uplift as the value of bonded
i to LEG III cover.As highlighted in SDV's Top 10 Cases projects were higher due to broad cost escalations. Losses
of 2023 the court cited Illinois law and determined incurred from defaulting contractors rose during the year,
that the"honeycombing and voiding"of the concrete and that trend is expected to continue.
CONSTRUCTION INDUSTRY OUTLOOK Large construction and infrastructure shops are continuing did constitute damage,which the court defined as a
to develop and implement technology strategies across "detrimental change in the condition of the insured
As the U.S.economy continuous to defy a recession property."The District Court found the LEG 3 language WHILE IN THEORY THE COSTS FOR SURETIES
cautious optimism is the sentiment at most construction their operations including the deployment of advances ambiguous as far as it was unclear whether the damages TO MANAGE DEFAULTED CONTRACTORS
firms for 2024.There are expectations that the funds in artificial intelligence.A recent Deloitte survey cites that
p 55%of chief operating officers had indicated that the main sought to rebuild the faulty components constituted an COULD ULTIMATELY BE HIGHER, THAT WON'T
associated with the Infrastructure Investment and Jobs excluded "cost incurred to improve the original material BE FELT IMMEDIATELY.
act, Inflation Reduction Act, and the CreatingHel ful barrier to creating business value with artificial intelligence
p tives to Produce Semiconductors will flow into the was identifying the right use cases.These executives workmanship design plan or specification:'Considering
Ince
p this ambiguity,the court construed the language against
industryfurther buoying certain sectors such as civil noted concerns around cyber risk, data security, and Well-run construction companies will find a receptive
Y g its insurance company and in favor of the insured.
Lack of trust.To combat this concern the survey notes marketplace, and significant flexibilit to match people
infrastructure, industrial manufacturing, and sustainable While the coverage remains, available clients should p g y p p
energy projects.These sectors will continue the trend of that industry leaders are exploring a human-in-the-loop be prepared for elevated underwriting and conduct styles and other specific attributes of certain insurers. U.S.
a projects
y
me ects in the U.S.which is expected to continue concept that requires the involvement of highly skilled builders owned by foreign companies will in some cases
g p p individuals to carry out tasks such as fact-checking, appropriate due diligence on policy wordings.
and accelerate. find a more limited marketplace to support their needs,
in-depth analysis, and understanding the complex Casualt but the support does exist.
Increased interest rates and saturated supply has led details needed for each construction process. y
pp y While the primary and excess casualty market has
to a more pessimistic view for certain sectors including Actuaries for the industry peg the cost of the default
stabilized for quality risks with clean loss experience,
multifamily residential and industrial warehouses sectors. litigation funding, social inflation and nuclear verdicts relative to remaining backlog at the time of default, and
p g MARKET OUTLOOK: continue to be pain points for the casualty market.
Said slowdown is anticipated to begin in H2 of 2024 with CONSTRUCTION INSURANCE universally the actual cost of curing defaults is materially
increasing severity into 2025. at large.The use of new building materials and the more than actuarial projections.This unfavorable trend
Property unknowns associated with long term performance continues to worsen,with negative impact for surety
January 1, 2024, reinsurance renewals yielded flat to are a sticking point for underwriters. companies and, notably, their reinsurers.
VOLATILE SUPPLY CHAINS AND A SKILLED LABOR moderate increases.These are at the elevated levels
SHORTAGE ARE HEADWINDS CONTRACTORS stemming from the market correction seen in 2023 so Project owners have lost some COVID-era collaboration
ALliant is paying close attention to the impact of Florida's
ACROSS INDUSTRY SECTORS WILL FACE. THOSE clients will not see continued increases but stabilized House BU 837/Senate Bit[236 and Senate BU 360, in dealing with contractors over schedule and supply
FIRMS WITH ESTABLISHED RISK MITIGATION prices higher than a 3-5-year historical view. Enacted last year, this legislation looks to address how chain issues.Anecdotally, owners are holding contractors
PLANS FOR THESE EFFORTS WILL BE BEST suits a filed and litigated and revising the term for which more accountable to the letter of the deal than they
POSITIONED TO TAKE ADVANTAGE OF THE The builders risk market has sufficient capacity, although defect claims will be brought.The impacts of these had been.
pp Y INFLUX OF FEDERAL CAPITAL. changes this capacity can be restricted based on location/CAT chan have et to reflected in carriers'appetite but
exposure, project size and type of construction. Projects could be a case study in tort reform as they begin to
that involve innovative technologies, alternative have their intended effect,
construction methods or materials(such as modular
32 1 Alliant Insurance Services, Inc.
2024 Start of Year Report 133

FINANCIAL INSTITUTIONS
SURETY INDUSTRY OUTLOOK without experience have increased pressure on the
Despite modestly rising default claims, earnings for primary availability and terms for adequate surety support.
sureties remain solid.The sector remains extremely
attractive to insurance companies with surety operations, The cost of borrowed money has become an unwelcome . f v
and to those considering entering the surety marketplace. headwind for leveraged contractors.Also noteworthy is �, ,� �; ; - •'' �j� ,,\ ;
the underlying banking industry challenges... the middles %'-
market lenders who historically favor contractors are
NOTE THAT SURETIES ARE BEGINNING TO SEE facing some net outflow of deposits, which is limiting
A SLIGHT UPTICK IN THE FREQUENCY OF their ability to lend.While the largest banks can manage
CONTRACTOR DEFAULTS,AND MOST SIGNIFICANT, that issue better, they tend not to favor contractors from jwlct:!
THE SEVERITY OF THE COST OF DEFAULTS IS a risk standpoint.We expect this issue to be prominent %r
EXTREMELY HIGH.
in the industry during 2023.
'1
A shift is underway among certain infrastructure agencies
Nonetheless, the profitability of surety will do nothing to procure work on a more balanced basis. For example,
to quiet the trend of new entrants seeking what they design/build work remains popular, but in some cases,
view as favorable earnings potential, and nothing to owners are providing contractors more latitude to
blunt the appetite of established markets to expand commit to a fixed price further into the development of
a profitable business. design documents than was the case a few years ago. INDUSTRY ISSUES debt as existing loans mature.The increased vacancy
Contractors owned by private-equity funds is a trend The Financial Institutions industry started 2023 with rate and the drying up of lending capacity increases the
that continues, and while surety support remains solid the failure of three large U.S. banks that resulted in a likelihood of commercial real estate loan defaults in the
for well-run and well-financed companies, companies concerning banking crisis that continues to permeate coming years.
throughout the industry.The failed banks'$548.7B in
combined asset value represented the highest amount Macroeconomic factors are also a concern for financial
ever for failed banks in a single year.Throughout 2023, institutions and the underwriters who represent the
� many feared that the bank failures could trigger a insurers that focus on risk transfer for the industry. One
- contagion event across the banking industry. However, noteworthy factor in the large bank failures from 2023 was
� regulators acted quickly and took extraordinary measures the impact of elevated interest rates. However, rapidly-
- to reassure markets and depositors of the safety and rising high interest rates are only one of several factors
� ,� •� security of the banking system.The measures were affecting the overall business environment as we enter
' sufficiently effective and helped ensure that there were. 2024. Other significant factors include rising economic
no further large bank failures during the year.While the inflation, labor supply, geopolitical disruption,the pending
- t general election, and global supplychain disruption.
aggressive regulatory action may have helped the banking
industry to dodge additional failures, it did not necessarily
remedy the underlying concerns for many banks. As has been the case for the past several years,
ESG(Environmental-Social-Governance) issues also
remain at the forefront for regulators, investors, and
CONCERNS REGARDING COMMERCIAL REAL other stakeholders.As pressure from ESG activists has
ESTATE PORTFOLIOS INDICATE THAT THE developed, financial institutions may find themselves
BANKING SECTOR MAY NOT BE ENTIRELY increasingly trying to avoid the political and Legislative-
SAFE JUST YET. related ESG controversies, and as a result are resorting to
"green hushing" —that is, taking a much lower profile on
ESG-related concerns. However, given the pending and
Remote and hybrid work arrangements have caused existing regulatory concerns regarding ESG,we expect
t: rising vacancy rates in office buildings,which has that ESG will continue to be a high-profile issue for
stressed the commercial real estate sector, putting many corporate executives, investors, and other stakeholders
landlords in a difficult spot as they continue to try to for years to come and such priorities should remain a
service their debt.The stress is anticipated to put many priority item into the near future.
borrowers in a position where they cannot roll over their
34 1 ALliant Insurance Services, Inc. 2024 Start of Year Report 135

FORESTRY
For all the above reasons and issues,we fully expect that Coverage terms remain stable across most products,
regulatory change and activity will continue at a record except for property coverage that contains wind, flood,
pace in 2024.There are more regulatory rulemaking and wildfire exposures.While insurers are seeking to limit
Cr
initiatives and enforcement actions than could be covered their property-related loss exposures in disaster-prone ," `"• r �`�� ,, "
in a concise way, but regulators have been emboldened regions, there continues to be enough capacity with
by their focus on cybersecurity risk, cryptocurrency assets, more insurers competing for business.This competition
ESG, auditing requirements, and disclosure and expense is further aided by favorable workers'compensation loss
initiatives that are meant to protect investors and the ratios,which are deemed to increase an insurers'overall
integrity of the financial markets. Financial institutions profitability for financial institutions.
across the globe will remain focused on compliance „
and legal activities to show regulators that they prioritize We expect that underwriters will remain increasinglyn-
such regulations and activity. focused on retaining financial institutions clients with 4k��.b
positive risk profiles by aggressively underwriting and
competing on new and renewal business. Given the ) /
integrated nature of financial institutions, systemic cyber
Z.
INDUSTRY OUTLOOK 9 Y Y -
risk will be a leading concern for insurers seeking to ,+" t�` _
While many would argue that no segment of the financial►{
Limit exposure to catastrophic cyber events and losses. `l -� _ i►
institutions industry is safe from the challenging global
However, even in the cyber insurance market, financial
economic issues, challenges, and uncertainty, industry institutions have fared well and avoided cyber losses
sectors such as asset management, registered investment from both a frequency and severity standpoint where INDUSTRY ISSUES INDUSTRY OUTLOOK
advisors, mutual funds, and hedge funds continue be a significant market correction would be necessary for The forest products insurance market is continuing to face The outlook for the forest products insurance market
a highly sought after risk class by insurance underwriters
riters the industry.While underwriters may be concerned increased scrutiny from insurers. It is in part due to large is mixed.
looking for diversification within their risk portfolios. about the continued claims activity, uncertainties, and losses in North America over the past several years,which
Insurers also continue to favor financial institutions for the industry issues facing financial institutions, the led insurers to question the accuracy of insureds'property
traditional property&casualty insurance programs as the ON A MACRO LEVEL, FORECASTS FOR FOREST
laws of supply and demand control the cycles within valuations. Insurers are also concerned about the volatility
exposure is deemed to be highly profitable. Insurers have the insurance marketplace, and the supply of capacity of the lumber market,which makes it difficult to accurately PRODUCTS BUSINESS ARE SLIGHTLY UP RELATIVE
rarely seen a series significant market-wide losses will continue remain above average and competitive predict future losses. TO THE LATTER PART OF 2022 AND PROCEEDED TO
pertaining to workerss''compensation, general liability, throughout 2024. STABILIZE THROUGHOUT 2023. HOWEVER,THERE
or property losses the financial institutions sector. Higher property valuations persist. However, insurers ARE SEVERAL CHALLENGES THAT COULD IMPACT
As such, P&C insurers are continually trying to increase their underwriting market share in financial institutions. WE EXPECT THAT COMPETITIVE CONDITIONS appear to have established a comfort level in current THE MARKET IN THE COMING MONTHS, INCLUDING
policy language. Rather than standardly imposing of THE ONGOING SCRUTINY FROM INSURERS,THE
WILL REMAIN IN EFFECT THROUGHOUT 2024 AND margin clauses that limit the amount of recovery that
From late 2019 through the end of 2021, the financial THAT THE FINANCIAL INSTITUTIONS INSURANCE an insured can receive if their losses exceed a certain VOLATILITY OF THE LUMBER MARKET,AND THE
institutions management and professional liability MARKETPLACE WILL CONTINUE TO EXPERIENCE percentage of their insured value, underwriters are doing POTENTIAL FOR REGULATION CHANGES.
insurance marketplace was in a so-called "hard"market, FAVORABLE PRICING TRENDS AND THE it on a case-by-case basis.
meaning that most buyers saw their insurance premiums
increase significantly,The same period also saw unheard CONTINUATION OF COVERAGE ENHANCEMENTS. For insureds, the key to success will be proactively
Economic and climate-related risks are also growing working with their insurance brokers to understand the
of activity involving SPACs(Special Purpose Acquisition challenges for the industry.These include physical risks,
challenges facing the market and to develop a plan to
Companies)and other investment vehicles that requires such as drought and wildfires,as well as transition risks, mitigate their risks.This includes reviewing their valuations,
complex insurance solutions.The"hard"market pricing such as the shift to a low-carbon economy.y understanding the implications of margin clauses, and
environment attracted new capital and new market
participants, and such participants pushed significant developing contingency plans in the event of economic
The scrutiny of the forest products insurance market is disruption or increase governmental regulation,
competition in the financial institutions'insurance likely to continue in the coming months and years. Insurers
marketplace in 2022 and throughout 2023.Amidst the are under pressure to reduce their exposure to risk, and
increase in insurance capacity, most insurance buyers they are using a variety of methods to do so.This includes
have seen the return of a competitive environment that demanding higher valuations, imposing more restrictive
includes overall pricing decreases and an expansion in coverage provisions, and writing fewer policies in certain
coverage.The favorable market has had an impact with geographic areas.
respect to excess layers of insurance, in particular.
36 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 137

HEALTHCARE LIFE SCIENCES
i
INDUSTRY ISSUES INDUSTRY OUTLOOKS INDUSTRY ISSUES companies scrambling to determine how specific drugs,
The healthcare professional liability landscape is stabilizing. The recent substantial$261M jury verdict in Florida, Last year was a tale of two industries, one for which the as well as classes, might be viewed by the CMS. It is too
However, the rising frequency of substantial legal alongside other significant judgments, and settlements, FDA approved a record number(71)of new therapeutic early to tell how this will play out, but history tells us that
judgments and settlements is impacting anticipated has led some markets to reconsider underwriting or drugs(NTDs), and another in which capital from both the plaintiffs' bar will seek redress for investors harmed
loss reserves.This is prompting some excess carriers further reduce limits for Children's hospital risks. Insurers private and public sources deepened its drought in the by companies"mismanaging"their approach to the
to demand higher underlying retentions and limit to are closely scrutinizing potential risks associated with wake of 2021's waterfall of IPOs(1004 potential IRA consequences,
quote and bind placements. sexual abuse or other batch-related exposures,
particularly in the academic healthcare institutions. Of the NTDs, Casgevy is the first FDA approved therapy WHILE SUPPLY CHAIN AND LABOR CONSTRAINTS
Carriers are raising retentions for accounts with unfavorable utilizing CRISPR genome editing technology.This is MAY BE EASING, MANUFACTURERS ACROSS
experience or those located in less desirable jurisdictions. tremendous news for patients with sickle cell disease THE LIFE SCIENCES SPECTRUM CONTINUE TO
Healthcare systems situated in desirable venues are MANY HEALTHCARE ORGANIZATIONS ARE and shortens the timeline for this technology to be used
also witnessing rate adjustments ranging from 5%to 15% CONTEMPLATING HIGHER LIMITS DUE TO THE to treat patients with other rare diseases.While Casgevy BE PLAGUED BY PHYSICAL DAMAGE TO THEIR
in addition to premium increases driven by exposure CONTINUED INCREASE IN NUCLEAR VERDICTS and other gene therapy treatments went through the FACILITIES/INVENTORIES AS WELL AS MATERIAL
growth. Physicians purchasing primary limits($1M to$2M) AND SETTLEMENTS. WHILE THERE IS ADEQUATE gamut of the FDA approval process for NTDs, it is important INTERRUPTIONS TO THEIR OPERATIONS
are experiencing increases ranging from 3%to 10%. CAPACITY FOR MOST TOWERS, EFFORTS TO to note that due to their revolutionary advance, there is ARISING FROM CLIMATE CHANGE/NATURAL
INCREASE LIMITS WILL SEE HEADWINDS FROM a dearth of historical data on potential long-term side CATASTROPHE EVENTS.
MINIMUM PREMIUM PRICING AND THE RISK OF effects.However, unlike the newly approved GLP-1 obesity
drugs(e.g.,Ozempic),there are neither off-label issues nor
INVERTED PRICING RELATIVE TO LOWER LAYERS. alternative treatments.Thus, Product Liability insurers For an industry so dependent on sole source suppliers,
can underwrite these sickle cell NTDs with far fewer this can have a cripplingly impact on companies,
concerns than the GLP-1s. However, with a record As noted previously in this space, companies must
number of approvals, insurers will be seeking detailed demonstrate robust Business Continuity Planning and
underwriting information to assess the scope of new risks. a commitment to Risk Engineering,
Another issue confronting Life Sciences companies is the
potential impact of the Inflation Reduction Act of 2022
(IRA). In part, this is intended to lower prescription drug
prices. In August, the Centers for Medicare& Medicaid
Services(CMS) put forth its inaugural list of ten drugs
selected for price setting.The list sent both investors and
38 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 139

PUBLIC ENTITY
INDUSTRY OUTLOOK
If the annual JP Morgan Healthcare Conference is any
indicator, biotech will rebound in 2024 after a challenging #4
2023. In an industry that has grown used to abundant t
inexpensive sources of capital, the last two years have
forced executives to become more creative in financing
and operating their companies.According to the
HSBC Venture Healthcare Report, VC funding dropped
a whopping 23%from '22 to'23. On the public front, a
historically high percentage of companies traded at
or below their cash value in '23, IPOs barely made it
into double digits(11), and north of 150 companies had , W. W or
workforce reductions.As we head into'24 with interest a
rates and valuations down and NTDs on the upswing, i I I f I I 1 r
the industry is anticipating a resurgence in funding.
{�.�� , -ire_ •. ' .. . - - - —.-�.5 .�- -�f+ . . .� ,
FORTUNATELY, '23 WAS A SOFT INSURANCE
MARKET FOR MOST LINES OF COVERAGE
INDUSTRY ISSUES Recent Supreme Court Rulings
WHICH ENABLED COMPANIES TO REDUCE In June 2023,the U.S.Supreme Court ruled on several
COSTS ESPECIALLY FOR D&O, PRODUCTS/ Biometric Identifiers
A new and emerging area of concern involves the use cases that will have an impact on higher education going
E&O, AND CYBER. of Biometric Identifiers and the prospective violation of forward.The most high-profile ruling was a consolidation
privacy associated with those activities. Biometrics, in of two separate cases both brought forward by the group
For public and private D&O, the outlook for Premium, simple terms, involves the measurement and analysis Students for Fair Admissions(SFFA):one against the
Capacity, Coverage, and Retentions remains favorable. q physical
of unique h sical and behavioral characteristics to University of North Carolina and the other against the
Fellows of Harvard College.The Court determined in both
However, given significantly reduced D&O premiums determine 1)who a person is and 2) if he or she really is
y physical for most of the major carriers, we are witnessing a less
who the claim to be.These distinct h sical traits include cases that the admission process lacked clear objectives
and measurable goals to justify the use of race as a factor
reasonable approach to claims resolution from some. fingerprints,vein, retina, and voice patterns as well as
facial measurements. Behavioral identifiers often include for undergraduate consideration.Chief Justice John Roberts,
It is more critical than ever to align counsel and rates as in the majority opinion, stated that Undergraduate
part of placement negotiations vs.when a claim arises signatures, keystroke patterns, hand-eye coordination,
during the policy period. gait, and response times.The unique characteristics applicants at UNC and Harvard cannot use race or
are used in both the private and public sectors to drive ethnicity as a factor in determining selection because
Products/E&O will also continue to be very favorable for
efficiency p p in authentication. Examples include airports the practice itself depicted negative racial stereotypes,
which was inconsistent with the Equal Protection Clause
buyers based on supply vs demand alone. In a market replacing traditional boarding passes with face and finger cr
scans or colleges as a method to access dorms and of the 14 Amendment.This landmark decision reverses
that was historically led by a handful of resolute carriers, g the affirmative action direction on college campuses that
competing for all but the most difficult risks. However, confirm identification ahead of taking exams.
has been in place for over forty years. Importantly,while
it remains caveat emptor with respect to ensuring coverage details and claims provisions/handling. Regulation of data privacy does not exist at the federal the reversal itself will cause major changes to recruitment
Insurers continue to add new exclusions, particularly level, although all 50 States and the District of Columbia policies and practices in admissions,there is concern
for indications and materials,which are seldom noted have data breach notification laws. Numerous States over the lack of clarity regarding the extent to which the
While all policies should be audited annually to
have either passed or introduced Biometric Information intention of this ruling willapply(e.g.,scholarships,student
ensure that they are"fit for purpose" and "state of the Privacy Acts(BIPAX As a result, the door is open for activities, academic programs, employment, etc.).This
market;' Products/E&O policies tend to have the most litigation around the violation of these laws.As more lack of clarity regarding the "intent"of this ruling is all
unannounced changes, States are focusing on Biometric data, so too are too familiar with educational leaders as they have been
insurance carriers. Many carriers have recently begun struggling with a similar issue regarding running their
adding exclusions for BIPA. Title IX on their campuses without guidance from the
Office of Civil Rights and Department of Education. It is
too soon to opine on how this particular ruling may or
may not impact future premiums.A program that still
40 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 141

lacks strong guidance from lawmakers,will result in Lava Enforcement Liability(LEL) effected damage caps for public entities facing tort liability or Occurrence Limit of Liability Endorsements.Those
Litigation that will become the only guide toward under- LEL continues to be a focal point for the underwriting claims.Other plaintiff strategies include bypassing state insureds that have agreed to stair-step type valuation
standing howfar this affirmative action reversalwillapply. community. One major insurer of LEL recently reported tort protections and making novel civil rights assertions approaches over several years will be expected to
the average indemnity paid on an LEL claim has under the U.S.Constitution,allowing the case to be heard continue to trend their values beyond what current
Per-and Polyfluorinated Substances(PFAS) increased almost 2.5 times between 2016 and 2022. in federal court.This approach has been around for the inflationary factors are to get up to par with the current
Because of their widespread use and their persistence This same insurer noted the probability of experiencing past decade but is picking up steam due to social inflation industry benchmarking standards.
in the environment, many PFAS are found in the blood a claim with a payout of$500k or more is 6X higher in and the escalation of claim severity trends.
of people and animals all over the world and are present 2022 than in 2016. Primary capacity was available for Insureds viewed as
at low levels in a variety of food products and in the Emerging Risk-Fiscal Cliff in Public Transit having a favorable risk profile, albeit at increased rates.
environment. PFAS are found in water, air, fish, and soil Public Transportation is a$79B industry employing Those insureds that took higher retentions were able
at locations across the nation and the globe.Scientific AS A RESULT OF THESE TRENDS, MANY CARRIERS more than 430,000 people and supports millions of to promote the most competition within their primary
studies have shown that exposure to some PFAS in the HAVE LOOKED TO INCREASE RETENTIONS IN AN private sector jobs.According to the May 2023 survey layers(via oversubscription),which resulted in better-
environment may be linked to harmful health effects ATTEMPT TO ADDRESS THIS EXPOSURE, WITH of public transit members by APTA, one-half(51%)of than-expected pricing. Excess capacity continued to
in humans and animals.There are thousands of PFAS AT LEAST ONE CARRIER MAKING THE DECISION public transit agencies are facing a fiscal cliff in the be more of a challenge, causing many programs to be
chemicals, and they are found in many different consumer, TO NO LONGER PROVIDE COVERAGE FOR LAW next 5 years, defined as potential operating budget unable to renew their towers on a "per expiring" basis
commercial, and industrial products(eepa.gov). ENFORCEMENT LIABILITY. shortfalls. For larger agencies(200m+operating budget), due to pricing and market pressures.Those insureds that
the percentage is 71%.Operating costs have increased were able to renew with per expiring limits, specifically
The underwriting community remains focused on the since 2019 and as of the first half of 2023 ridership has for CAT-exposed insureds, often did so by implementing
growing potential of litigation, specifically for public Insurers are now requiring significantly more underwriting recovered to 70%of pre-pandemic levels. Public Transit's Alternative Risk Transfer products, such as parametric,
entities that operate water and wastewater treatment information surrounding law enforcement training and response to the fiscal cliff will be to seek increased state or by self-insuring parts of their excess layers that were
facilities. Most carriers have been applying PFAS procedures as well as early intervention performance funding, reduce transit agency costs, seek to increase deemed unreasonably priced.
exclusion on all 2023 renewals. and behaviors. local funding (transit tax increase), seek new revenue
sources, reduce services, and/or increase fares.A more Submission activity remains high, and renewals continue
Active Shooter Events Hyper Social Inflation, Nuclear Verdicts extreme measure that is less likely to occur would be a to take more time to be completed (especially for
Concerns over mass shooting exposure remain highly The term "social inflation" refers to the ways in which reduction in workforce. new markets). Certain carriers reported seeing a 30%+
relevant to Public Entities,venue owners, and event insurers'claim costs rise over and above general increase in submission activity throughout 2023, so it is
sponsors as many are named in various lawsuits that economic inflation, including shifts in societal attitudes, PTSD Presumptive Legislation highly recommended to submit renewal information as
allege lack of security and failure to protect the public. perceptions, and behaviors that lead to increased Many state legislators have introduced bills to cover PTSD early as possible to ensure proper lead time for renewal
Litigation costs. On the other hand, "nuclear verdicts"are benefits for public safety with some expanding benefits review and program completion.
With rising awareness of and increased exposure to large jury verdicts that exceed $10M in compensatory beyond police and fire to include dispatchers, teachers
these tragic events, many insureds are exploring both and punitive awards.These verdicts have been growing or administrative positions.This trend is not likely to abate Roof age was also top of mind with insurers and faced
active assailant and special event liability policies in frequency and size,with the median verdict rising any time soon. Responding to these trends, public entities increased scrutiny, particularly in the K-12 education
as means of transferring the potential exposure and significantly between 2010 and 2023.The increase are examining or have implemented alternative benefits area. Insurers are requiring information on the condition
litigation that can emanate from these events. in nuclear verdicts and social inflation has created to providing treatment and disability leave outside of the of the roof, such as: roof maintenance, roof repairs, and
challenges for liability claims in the United States, workers'compensation system. re-roofing. In some cases, if sufficient evidence cannot
Sexual Abuse and Molestation (SAM) driving up settlement costs and leading to skyrocketing be provided, the market is looking to impose actual cash
Jury verdicts and settlements continue to grab headlines insurance costs,The impacts of social inflation and Property value stipulations or similar types of restrictions on roofs
resulting in a hyper-focus by underwriters on this exposure. nuclear verdicts across various industries is raising During the second half of 2023,we saw signs of cooling over a certain age. In certain geographies, including the
The full extent of the prevalence of this exposure and concerns about its impact on businesses, consumers, inflation which should continue into 2024 and ease Gulf Coast,Arkansas and Oklahoma, secondary perils
potential claims remains unknown, but so far,the numbers and the legal system. some of the inflationary pressures seen over the last are still commanding higher dollar amounts, or even
are simply staggering. Underwriters have set their sights several years. Despite these downward trends, property percentage deductibles.
on insureds who have this exposure ranging from K-12 The impacts of social inflation and nuclear verdicts are underwriters, particularly in the Public Entity space,
schools to parks and recreation departments to police significant, driving up insurance costs and settlement still have insurance to value concerns.The viewpoint of Wildfire concerns have expanded from traditional areas,
cadet programs.This trend is driven by numerous States expenses.To mitigate these impacts, some experts underwriters remains that there is substantial ground to such as California, Oregon,Washington, Idaho, and
who have enacted reviver statutes allowing otherwise suggest the need for tort reform like that introduced make up for the past 5-10 years of static valuations.An Colorado. Recent reports have added States such as
time-barred claims for childhood sexual abuse to proceed. during the 1970s and 1980s.Additionally, efforts to raise Insured must be able to point to their valuation "narrative" North Carolina, Florida, and New Jersey as geographies
The statues vary by jurisdiction but do one of three things: awareness of how social inflation affects consumers and or"process" in the way of third-party appraisals,value of concern. Unfortunately, this problem is not likely to
(1)eliminate the statute of limitation (2)extend the statute to explore solutions such as robust local corporate social trending and/or favorable comparisons to benchmarks, improve given certain drought conditions across the
of limitations or(3)create a window in which otherwise responsibility(CSR)and the use of technology to prevent or risk facing restrictions on related terms and conditions. country.Wildfire has even begun to become a focus
time-barred claims can be filed. future nuclear verdicts.Certain states offer no legislatively These restrictions include items such as Margin Clauses for casualty placements in extreme circumstances,
42 1 Alliant Insurance Services, Inc. 2024 Start of Year Report 143

with excess liability and liability(re)insurers keying in renewals which include capacity pullbacks and higher
on insured's wildfire mitigation plans. retentions. Conversely, more favorable jurisdictions
have seen the market behave much more favorably—
Secondary perils continue to drastically impact Insurer more competitive rates and capacity are easier to come
profitability,with increased frequency and severity by. New capital has begun to enter the liability market
specifically due to severe convective storm events, including the Bermuda carriers who have traditionally
freezes, flooding, and extreme heat. not had an appetite for public entity business.
Property
THE DOMINANT DRIVER OF LOSSES IN 2023 WAS The 1/1/2024 treaty renewals experienced a stable
THE SEVERE CONVECTIVE STORM (SCS) PERIL, and orderly process due to an increase in capacity
WHICH ACCOUNTED FOR ROUGHLY 58%, OR A supply. Despite the smoother renewal compared to the s
RECORD $72B OF THE GLOBAL INSURED LOSS previous year, uncertainties persist, deterring potential
TOTAL. SIX OF THE TOP 10 MOST EXPENSIVE new investors from entering the reinsurance space. •
INSURED EVENTS OF THE YEAR WERE SCS
Factors such as the impacts of climate change, inflation, '
EVENTS IN THE U.S. litigation funding, and geopolitical risk contribute to this
hesitancy.The focus for subsequent renewals in 2024 is
on encouraging reinsurance appetite growth, considering
positive developments at the 1/1/2024 renewals.
INDUSTRY OUTLOOK
Insurers, after of limit reductionsd limited
Liability years an
Many insurers are reporting loss cost increases in the reinsurance capacity, are not widely reducing coverage
range of 10-15%.As a result, Excess Liability will continue limits for 2024.Valuations are crucial for insureds, and ` = '
to be a challenging market.Capacity reductions and
carriers expect a proactive valuation narrative and r' "
increased retentions have been commonplace, and SAM
philosophy. Insureds with a robust valuation process, .
and law enforcement exposures continue to be heavily preferably conducted by a third-party appraisal firm, mall
are more favorable.Those lacking a compelling narrative
scrutinized by underwriters.The best approach to these •
sensitive topics is continued attention to risk control, early may face carriers pushing for Occurrence Limit of Liability
intervention,and education of staff. Innovative approaches or Margin Clause provisions.
being examined in the public sector include alternative
While insurers have varying views on models,
ii CAT dels, RMS,
risk transfer(ART)which is developing alternative methods
to finance losses further than purchasing retail-level an industry leader, released RMS v23 in June 2023, • �`
insurance.This novel approach uses an combination of showing significant changes, especially in coastal regions
pp y �-.
and Named Windstorm. Regions like Texas, the Gulf,
funded and unfunded strategies depending on a client's - _
30%t d i up o a t th experienced
S d th
Florida,
an e Southeast 1 - Y
needs, available capital sources and risk profiles.The
ultimate results are either validation of the retail insurance uptick,while the mid-Atlantic and Northeast saw around
marketplace or a viable financial alternative for funding 10%. Monitoring these changes closely is essential as
future losses. Multi-year structured solutions are one carriers implement them throughout 2024.
solution gaining momentum, offering a program that
can last years and include aggregate stop loss protection Rate increases will persist in 2024, though not at the
in the event of a series of large loss events in one year. levels seen in 2023.Stabilization of capacity and carriers'
t t ib ill k i i t di t i t ineresn expanding on certain risks w contribute o �.
A structured solution view is improving a client's total r � I
cost of risk and can provide the advantage of significant minimal to moderate rate increases for well performing j
placements. Carriers aim to collaborate with insureds to
premium savings overtime.
restructure/layer programs, avoiding "trading dollars"and
Unfavorable jurisdictions, many of which were included rewarding buyers putting more "skin in the game,"with
in the list of Judicial Hellholes published by the American
the aim for greater long-term rate and pricing stability.
Tort Reform Foundation, are still facing some very tough l
w •
44 1 Alliant Insurance Services, Inc. • • - ■;

REAL ESTATE & HOSPITALITY
reductions.We expect this trend to continue barring
any large-scale Widespread loss event(s)affecting the
r global marketplace.
NF The real estate Casualty market remains stable although
pressure on deductible levels and coverage terms still
, • 11 _ exists for certain asset classes,exposures,and geographies.
As an example,certain carriers have recently begun pulling
't= ' K ti "` �� '` ► ,,� out of covering habitational exposures Within the State of
Georgia due to poor loss experience.
ALLIANT REAL ESTATE AND HOSPITALITY
- - 1 i ( ► <� " RECOMMENDS THAT INSUREDS SET STRATEGIES
ILA'N
EARLY, CLEARLY COMMUNICATE COMPANY
bp�
__. _ ,.___ = GOALS WITH BROKER AND CARRIER PARTNERS,
AND SEEK TO CAPITALIZE UPON THE MORE
FAVORABLE MARKET CONDITIONS THAT EXIST
INDUSTRY ISSUES direct insurers, the implementation of larger reinsurance IN 2024.
2024 is shaping up to feel markedly different than 2023 for retentions over the past 12-18 months has provided some
the commercial real estate sector. Moderate improvements additional buffer for reinsurers. Direct insurers continue
in interest rates coupled With hopes of further reductions to retain significantly more risk than they have historically
throughout the year have Well-capitalized investors gearing with many carriers reporting that their 2023 reinsurance
up to execute upon strategies that Were put on hold in treaty renewals often resulted in a doubling of retentions
along with substantial increases in rates. Fortunately,
2023. Further, concerns regarding inflation in the sector
reinsurance treaties renewing 1/1/24 were much less
seem to have subsided.2024 will be a year of transition for
volatile with many carriers reporting stability in retentions •
many real estate firms as they decide whether they will be ` •, ,
net acquirers or sellers. and very moderate pressure on rates.
WHILE NEW DEVELOPMENT ACTIVITY IS INDUSTRY OUTLOOK
VIRTUALLY NON-EXISTENT IN CERTAIN ASSET 2024 real estate Property renewals have been exceptionally
CLASSES (FOR EXAMPLE — URBAN COMMERCIAL less volatile than those experienced in the post-Ian
OFFICE PROJECTS) OTHER ASSET CLASSES SUCH environment of Q4 2022 and 2023, More capacity is
AS SUBURBAN AND EXURBAN HABITATIONAL coming back into the market after the pullback of 2023 ,
due in part to the fact that 2023was a profitable year
DEVELOPMENT CONTINUES AT A STEADY PACE. for most carriers writing U.S. real estate Property risks.
Further, carriers have set meaningful growth goals for ,
Although 2023 global insured losses appear poised to 2024 that are not achievable in the current environment
exceed $10OBn for the third consecutive year, carriers based solely upon rate increases. Finally, insureds have
and reinsurers dodged major catastrophe losses in the reestablished some leverage in the marketplace upon
traditional sense(i.e., U.S. Earthquake and Hurricane implementation of alternative risk and/or captive strategies.
risk). Direct carriers report a continued uptick in "non-
traditional"CAT losses including convective storms Real estate insureds with favorable Property loss
(wind/hail)and winter freeze.While non-traditional CAT experience should expect pricing stability in 2024.
losses coupled with the largest historical driver of real When marketed aggressively, many January renewals •`;
estate industry losses(water damage)continue to impact are coming in flat, flat, or in some cases,with slight rate
46 1 Alliant Insurance Services, Inc.
2024 Start or Year Report 147

i
CONTACT INFORMATION
i•�
Alliant can help you navigate the challenging "
and ever-changing insurance market.
As the nation's leading specialty broker, Alliant draws upon our
resources from across the country, regardless of where the .-
resource is located, to ensure you have the best subject-matter
experts by your side,
Alliant.The More Rewarding Way to Manage Risk. _ 4W- III MOW
P1
- -
�
For more information, contact: • �'.�'
ALEXANDRA LITTLEJOHN
Managing Director .
Alliant Retail Property& Casualty
alex.littlejohnoaalliant.com
w {
48 1 Alliant Insurance Services, Inc. i rl�r

THE 2024 START OF YEAR REPORT
INSURANCE MARKETPLACE
INSIGHTS AND OBSERVATIONS
1,�
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w
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-"-- • __- _ L'Ieyli.3F4irr':i;:'s `31ttilrlll ��:.
.3-
",ant The More Rewarding
Way to Managenage Risk
retailCa alliant.com I alliant.com I Alliant Insurance Services, Inc.