Q:  What’s going on in the Stop Loss market? Premiums have jumped significantly. Can you explain what’s driving these changes and potential future impacts?

A:  You are certainly not alone in your observations!  We are navigating the most challenging stop loss renewal season that has been seen in the last 15+ years.  Below is what we are seeing occur in the market today and the factors behind these changes.

1. Loss ratios on the $40B+ of stop loss premium industry-wide continues to increase over prior year and for some stop loss carriers are up to 85%. Historical target is 75% which is also 10-15% higher than 10 years ago. Stop loss carrier leadership have used the term “unsustainable” and are suggesting that this is a 3-5 year correction process.
2. Capacity is up which creates pressure on the more favorably running cases and pushes the need for more rate to the cases that are running poorly. It creates a bit of a bookend concept in the renewal action. Rate passes and decreases are still common for favorable cases which then has resulted in a 300% increase YOY in the cases whose initial renewal hit the rate cap.

What does this mean?

• Average Rates increases are up over prior year. Carriers are targeting 22-29% increases on their blocks for 2026, which is up from 17-22% a year ago.
• Things are firming later this year based on the market need from an underwriting perspective. September data for the 1/1 renewals represents a significant difference in the performance of a carrier’s block. Carriers waited for September data, which compressed the renewal timeline by at least a month, creating concern around decision making timelines.
• Early lock offers (prior to 90 days) are experiencing premium loads of 7-12% as majority of claims have not yet materialized.
• Nine months of data (September for January renewals) being required is the norm with very few exceptions being granted.

Other major industry Issues being seen:

• Fewer 'Rate Cap, No New Laser' contracts available to clients
• Claim denials are increasing
• E&O claims will be on the rise
• Carrier performance metrics putting pressure on underwriting activity

This response was provided courtesy of Kurt Rich, Vice President and Team Lead at Lockton Companies.

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