Global property rates continue to rise in Q1

They predict a continued uptick of pricing through 2012. But, with capacity for property risks still plentiful, rate increases are, barring any major losses, likely to continue to be modest, they add. Advisen reported that along with property insurance, the cost of general liability and workers’ compensation cover was flat to up slightly in each of the last two quarters. Marsh gave a more positive outlook for buyers and reported that global general liability pricing remained stable in Q1, with most classes either flat or experiencing slight decreases at renewal.hideAccording to the broker’s Global Insurance Market Quarterly Briefing: Q1 2012, property rates rose, or were at best stable, for both catastrophe-exposed and non-catastrophe exposed risks in most geographies this year. This is despite the absence of major natural catastrophes during the first three months of 2012. In the US rates for catastrophe-exposed risks generally increased between 10% and 20%, while non-catastrophe exposed property risks typically rose by up to 10 percentage points. Rates were more stable in Europe with France, Spain and Russia reporting a flat market and German risks even seeing an average decrease of between 0% and 10%. However, cat-exposed UK property risks saw general increases of up to 10% with Italy and Turkey suffering increases of anything between 10% and 20%, according to Marsh figures. In Japan and New Zealand, insurance programmes with catastrophe exposures typically saw rate increases greater than 30%. Increases for catastrophe coverage in Australia were typically up by around 10% to 20%. According to Marsh and Advisen the leading driver of change in the property market was the unprecedented insured catastrophe losses experienced in 2011. The events cost the insurance industry about $108bn in 2011, according to reinsurance broker Guy Carpenter & Company. Catastrophe losses were the principal contributor to heavy underwriting losses last year. AM Best estimates a 2011 combined ratio for the P&C industry of 107.5%, up from 101.0% in 2010. The effects of these losses are also being felt in key risk areas like contingent business interruption. Here global insurers are taking a more cautious approach to granting cover, and asking for more detailed information before underwriting the risk, explained Marsh. In addition, changes implemented in 2011 to the risk models used by insurers will likely add impetus for property rate increases in the first half of 2012. “The global commercial property insurance market is continuing to show signs of upwards rate trends, especially for catastrophe-exposed risks,” said Dean Klisura, US Risk Practices Leader at Marsh. “In the US, the property market continues to be in a state of transition with insureds more likely to experience rate increases than those renewing with flat or modest rate decreases. We believe that this trend will continue in the short term, with the average rate of increase continuing to rise month over month.” Non cat-exposed property risks were generally stable in Q1, according to Marsh. But the US, UK and Chile saw average increases of between 0% and 10%. Risks in Australia, Italy and Turkey saw prices up by as much as 20%. Rates are likely to rise moderately for both catastrophe and non catastrophe-exposed risks going forward barring any heavy losses, agreed Marsh and Advisen. Capacity remains plentiful with no significant withdrawal in the first quarter of 2012. “Insurers are breathing a sigh of relief as rate levels continue to inch higher in many lines of business, reversing an eight-year trend of falling premiums. Driven by record catastrophe losses in 2011, dwindling investment returns, and growing demand for insurance capacity as the economy improves, renewal premiums tracked by Advisen have been flat to slightly higher in property, general liability and workers’ compensation in each of the past two quarters,” said the advisory firm in its State Of The Commercial P&C Market report. “While insurance executives hail the increases, which they claim are essential to maintaining the health of the property & casualty industry, the industry is very well capitalised, which could make the rally difficult to sustain. Catastrophe losses were principally responsible for a small drop in policyholders’ surplus in 2011. However, at an estimated $563 billion as of the end of 2011, surplus remains at a near-record level,” it added. “Insurance buyers can therefore expect to see premiums continue to creep higher in 2012, though barring major catastrophe losses, the type of skyrocketing premiums that characterised the 2001–2003 hard market are unlikely,” it continued. Among the other factors that will influence the pace of change are reinsurance capacity and rates, investment returns and the state of the overall economy, added Advisen. While the advisory firm reported a flat to upward trend in casualty pricing, Marsh’s figures reflect a flat to slightly softening general liability market. The broker also reported that demand for trade credit insurance surged dramatically in Q1 as worries about the solvency of companies in the eurozone increased. This was particularly evident in Asia where demand increased by up to 60%.

Global property rates continue to rise in Q1

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