P&C Insurance Outlook: The Top 4 Trends for 2022

A global pandemic, growing concerns over climate change, supply chain challenges and cyber risk have resulted in increased claims and a focus on insurance prices across industries.

As a result, the market is moving away from transactional coverage and more toward co-management of risk.

Understanding these trends — and, more importantly, the risk management solutions that position business owners with underwriters — will be key to securing coverage in 2022.

Here are four “mega-risks” to expect in 2022 — and how they are affecting insurance costs in the P&C market:

1. Climate change will lead to an increasing number of natural catastrophes.

In 2021, the U.S. had 19 weather disasters that cost $1 billion or more.¹ Those catastrophes included wildfires, floods, tornadoes and hurricanes.

Worldwide, weather conditions slammed farms and food manufacturers, reducing yields in the northern U.S. and southern Canada, damaging crops and affecting livestock and meat processing across the globe.²

Real estate owners are experiencing difficulty finding locations not exposed to flood, fire or storms. Properties built on hills to avoid wildfires or miles away from the nearest flood zone are now in the path of intense storms.

Similarly, the hospitality industry is losing business as weather disrupts operations. As a result, P&C rates for both restaurants and lodging establishments will rise as much as 20% in 2022. Property rates for other types of commercial real estate will rise 10% or more, as well.

To combat these issues, insurance companies want businesses to use enhanced warning and predictive systems, such as catastrophe (CAT) modeling and fire- and water-resistant construction materials, when possible. While storms are now more foreseeable, they are still out of human control; therefore, a strong risk management solution includes a thorough post-loss response plan for recovery and resuming operations.

2. Risk of cyber threats will continue to rise across industries.

While increased reliance on technology has helped improve operations across industries, it has also increased cyber risk.

In the second quarter of 2021, attempted online fraud in the hospitality sector rose 156% year-over-year.³ Cyberattacks against large food manufacturers halted production at several processing facilities. And in an industry in which 60% of business say they’re not ready for cybercrime, the cannabis sector represents a major target for bad actors.⁴

As cyberattacks become more common, cyber insurance rates will rise to the tune of 20% to 30% this year. Brokers are partnering with vendors and insurance carriers to address this through risk management solutions, including improved network defenses, multi-factor authentication, employee training and third-party vendor security audits.

3. Supply chain disruptions will remain a huge problem.

By the end of 2021, supply chain disruptions were commonplace. Labor shortages and consumer habits have made it difficult for businesses to deliver products, materials and other goods quickly during the course of the COVID-19 pandemic.

In the construction industry, material shortages interrupted cash flow, leading to cost spikes, ruined schedules for projects and busted budgets. Expect construction coverage costs to rise for this and other reasons between 5% and 35%, depending on project size, with large, risk-prone projects at the higher end.

For short-haul drivers, simply leaving port with cargo is an administrative and bureaucratic nightmare. Coverage for courier and delivery fleet will increase by 25% or more.

Resilience is the key to mitigating these issues, as businesses should build up materials reserves and develop backup suppliers. It’s also important to establish local and regional supplier relationships to avoid reliance on foreign-made supplies.

4. Employers will need to adapt to new worker expectations.

It has never been more difficult to attract and retain quality employees, and pandemic-related challenges have created different expectations for the work environment. A strong stock market and aging population is also pushing “intellectual capital” in trade into retirement.

Vaccine hesitancy is also squeezing labor markets, while leading to a rise of workers’ compensation claims in the healthcare sector. Although WC premiums are expected to remain flat in 2022, the challenge will be at the worker level, as remaining staff will have to work longer hours to make up for their fellow employees.

To combat this challenge, brokers can offer employers improved pay; they can expand their extended benefits programs with perks such as paid apprenticeship training programs, vocational skills training programs and mental health services.

Moving forward in 2022: Securing the right partner

The COVID-19 pandemic has exploded risks and insurance coverage costs, creating a complex environment for business owners and employers of all types.

These conditions make it essential to partner with a broker that specializes in your market, understands your risk level and knows the market inside and out. In doing so, you can build a strong risk management program that positions your business for a successful year.

HUB International’s team of experts is ready to help you prepare for the unexpected with tailored solutions and consulting across insurance, risk services, employee benefits, retirement and private wealth management.

¹ National Oceanic and Atmospheric Administration, Billion-Dollar Weather and Climate Disasters,” accessed January 11, 2022.
² Bloomberg, “World’s Food Supplies Get Slammed by Drought, Floods and Frost,” July 24, 2021.
³ SmartBrief, “How the travel industry can fight back against cyberthreats,” August 18, 2021.
⁴ MJBiz Daily, “Cannabis companies considered ripe targets for ransomware attacks,” December 17, 2021.