Natural disasters, pandemic, ‘nuclear’ verdicts all contribute to rising costs of insurance

Natural disasters, pandemic, ‘nuclear’ verdicts all contribute to rising costs of insurance

The commercial insurance industry is at “an inflection point,” according to McKinsey’s Global Insurance Report 2023. From supply chain and labor issues to economic and social inflation, a myriad of challenges impacts coverage, premiums, deductibles, and other areas critically important to businesses.

We checked in with three leaders in the commercial insurance space in WNY to find out what they’re seeing and what advice they have for business owners in terms of navigating the industry.

David Knapp – Lippes Mathias

David Knapp

“We’re seeing a continuation of a hard market,” said David Knapp, an attorney who is a partner with Lippes Mathias LLP and a member of the firm’s Insurance Recovery, Counseling & Litigation Practice Team. “Premiums are going up.”

Premiums are the amount a policyholder pays for coverage, typically on a monthly basis. Among the many reasons premiums are rising, says Knapp, are inflation, a down economy and increases in claims for cybersecurity events and natural disasters.

Global insured losses continue to outpace historical averages. Last year eighteen major disasters across the nation, including Hurricane Ian, added up to $165 billion in damages, according to the National Oceanic and Atmospheric Administration. Regardless of where these costly disasters occur, they have a ripple impact throughout the commercial insurance industry.

“It’s a tough market for policyholders,” said Knapp who, in his practice, proactively counsels clients on insurance-related issues, including analyzing coverage for claims. Knapp routinely evaluates corporate insurance programs and policies for potential coverage gaps, and tailors insurance programs to meet clients’ unique risks.

Knapp sees more policyholders focusing inward on their own risk control. Some clients opt for higher deductibles or self-insured retentions (SIR), a risk financing strategy by which a business covers a set dollar amount before an insurance company begins to pay out claims.

Another issue Knapp sees more of is carriers imposing new restrictions or requirements on policies at renewal, especially in the areas of cyber insurance, construction, and energy.

“The big thing in this kind of market is to take a fresh look at your policies,” Knapp said. He recommends business owners review their policies regularly with a trusted advisor. It’s also important to make sure your vendors and service providers maintain the right types of coverage.

In terms of practicing law in the commercial insurance space, Knapp enjoys the fact that constantly evolves and opportunities to assist clients at all stages of the commercial insurance process are plentiful.

“I really enjoy helping clients prevent losses to begin with, but if there is a claim, there’s something very satisfying about getting recovery,” Knapp said.

Gregory C. Knicley – Tompkins Insurance Agencies

“We’re in the middle of a hard market, which means prices are increasing and underwriters are scrutinizing accounts more closely,” according to Gregory C. Knicley.


Knicley is senior vice president of Tompkins Insurance Agencies, Inc., which was founded in 1875 and provides a full range of personal and commercial insurance and employee benefits products and services across New York and Pennsylvania.

Knicley sees nationwide challenges with property insurance due to the number of catastrophic weather events and the increasing length of time it takes to rebuild structures. This is often due to the supply chain and a tight labor market coupled with the high cost of materials due to inflation. These factors combine to drive up the costs of premiums.

“Most of the challenges we’re seeing now go back to property,” Knicley said. “The property market tends to be the worst of it, and it doesn’t look like it will change anytime soon.”

The good news is Knicley is starting to see a slight leveling out in cyber insurance pricing due to underwriting tightening up and clients following suit with adapting multi-factor authorization, employee education and other protections.

Brian Allen – Walsh Duffield Companies

Brian Allen is a commercial insurance consultant with Walsh Duffield Companies, Inc., a fifth-generation family-owned insurance agency with locations in Buffalo, Medina and Rochester. Some of the trends he’s seeing in commercial insurance right now are more stringent underwriting and in-depth applications for policies, as well as supply chain issues impacting the length of claims.


For example, if a new part is needed to fix a vehicle that was in an accident and it’s delayed due to labor and/or supply chain issues, the claim will take longer to settle and will cost the carrier more in the long run.

He’s also seeing premiums for some lines rise due to economic inflation and social inflation. Social inflation is defined by the Insurance Information Institute as how “insurers’ claims costs can rise above general economic inflation, and it also includes the shifts in societal preferences over who is best placed to absorb risk.”

Social inflation can be driven by many factors, including negative societal sentiment towards big corporations, a plaintiff-friendly environment, and massive jury verdicts that usually exceed $10 million – known in the insurance industry as nuclear verdicts.

According to Advisen’s loss database, from 2015 to 2020, the median cost of a jury award of over $10 million increased from $20 million to $27 million.

Then, there’s the issue of reinsurance — which is insurance for insurance companies — driving up premiums. “In part because of nuclear verdicts, high inflation, and an increase in natural disasters the re-insurance market is tightening,” Allen said. “Reinsurance is that much more expensive and insurers have to pass on that cost to policyholders.”

Driven in large part by payouts for natural disasters, in 2022, the global dedicated reinsurance capacity reduced by over $40 billion from 2021 and reinsurance renewals in 2023 are expected to increase by about 20% according to USI’s 2023 Commercial P&C Market Outlook.

Caurie Putnam is a Rochester-area freelance writer.