For this Advisory Report, AAIS spoke with Patrick Laws, President of the Wisconsin Association of Mutual Insurance Companies (WAMIC) ahead of the 2023 WAMIC Convention. He discussed the biggest challenges facing the U.S. and Wisconsin insurance markets, how WAMIC is supporting its members amongst these challenges, and what to look forward to at this year’s convention.

Challenges Facing the U.S. Insurance Market

Laws believes the U.S. P&C insurance market is currently experiencing a hard reinsurance market as a result of record inflation. “In particular, we saw 20% inflation in construction labor and 15% inflation in construction materials,” Laws stated. “That, combined with increased storm frequency and severity, meant that claims expenses were much higher than projected. And high claims expenses combined with poor stock market results impacted the profitability of P&C insurers in 2022 and going forward into ‘23.” The hard reinsurance market is projected to last at least another 18 to potentially 36 months depending on how the market responds and storm activity, according to Laws. Furthermore, this hard reinsurance market has caused the homeowners market, primarily personal lines, to get hit the hardest. Laws is also seeing a tightening of the underwriting in terms of double-digit increases in premiums among many carriers and increases in deductibles, particularly storm deductibles. “We're seeing a $2,500 wind hail deductible being added to policies and in some cases, there's been a movement towards percentage deductibles which have existed in terms of hurricane deductibles in the Gulf Coast and the East Coast for many years,” Laws explained. “But now we're starting to see those being applied far more liberally and in the Midwest in response to increased storm activity.”

Unique Challenges Facing the Wisconsin Insurance Market

Like the rest of the country, the Wisconsin market in terms of P&C has the same issues with increasing storm frequency and severity. But one of the unique issues to Wisconsin is the requirement for unlimited aggregate reinsurance. “Grinnell Re and Guy Carpenter both told their existing clients that they would still be able to offer them unlimited aggregate reinsurance, but they would not be able to write any new unlimited aggregate reinsurance contracts for new potential clients in Wisconsin going forward,” Laws shared. “Thankfully, the Office of the Commissioner of Insurance (OCI) saw what was happening in the marketplace and issued some new guidance, easing some of the restrictions on limited aggregate reinsurance requirements.” The OCI is now allowing company tools with sufficient surplus to convert to domestic mutuals and then is waiving the requirement for those domestic mutuals to have unlimited aggregate reinsurance. “Because of this new guidance, there is also some potential merger activity where two, three, or even four companies are looking to merge to get to the surplus requirements and get enough premium to be an attractive client for Guy Carpenter,” said Laws. 

How WAMIC is Supporting Its Members

WAMIC has had constant communication with its members this year as market conditions have continued to rapidly shift. “We've been working with the reinsurers to explore solutions and options for our members,” Laws shared. “We partnered with Vertafore and Mutual Capital Analytics to provide an industry report to help our members benchmark their current premiums as part of their overall underwriting strategy using Wisconsin quoting data from 2022.” And, as always, WAMIC has provided operational support for its members with regard to mergers, affiliations, and conversions to domestic status.

2023 WAMIC Convention

The upcoming WAMIC is a pivotal convention due to the several mergers that are potentially happening in Wisconsin. As a result, this might be the last convention for some of its members as they merge into other companies and their companies cease to exist. “It’s an opportunity for our members to get together as a group and compare notes and talk about what's going to happen in 2024 and beyond for the industry,” said Laws. “I'm also excited for our keynote speaker, Ben Liebl of Kwik Trip, as well as NAMIC chair, Jake Black, who we will be interviewing.” AAIS President/CEO, Werner Kruck, will also be leading CEO roundtables with WAMIC executives.

To view the full interview with Patrick Laws, please click the video above.