Umbrella Liability –
Current Market Observations
Gerry Palisi, FCAS, MAAA
Aspen Insurance Holdings Ltd.
Umbrella Rate Change
• CIAB 1Q2008: -13.5% (premium change)
• Marketscout.com April 2008: -12% (premium
• Assuming an overall increase in exposure
levels, corresponding rate change would be
• Assuming new business not fully included,
overall rate change would also likely be worse
• Construction Segment: is the exposure decline
commensurate with the premium decline?
Umbrella ELR Dilemma
• ELR is often a pegged, selected, or imputed value,
rather than one based on credible loss data
• Small/regional umbrellas, and high attaching capacity
excess, are both frequently loss free for most/all years
• Given large negative rate changes (-10% or greater) and
leveraged trend (approx 10% or more), how should a
“selected” ELR change year-to-year?
• For low frequency/high severity lines like Umbrella or
High XS, where proportional structures are common, is
the ELR a good metric for decision-making?
• If the “true” ELR is 20%, should we be using it?
• As underlying rates & premiums drop, cedants
seek increased ceding commissions on QS and
• Have yet to see any cedant rate change data
showing changes of -10% or worse. Why?
• Do management “floors” on rate decreases help
• Softening rates are preferable to softening terms
& conditions, or softening underwriting
• It could be worse – you could be an umbrella
• Questions for our panelists?