Overall corporate insurance rates flat but cat risks rising–Marsh

Those European property accounts unaffected by catastrophes even managed to secure further reductions of up to 10% said the broker. In its Insurance Market Update that covers global markets as well as Europe, the broker said that market fundamentals remain strong. Rate decreases were common in most classes of business not affected by large losses or that carry significant catastrophe exposures.hideDespite significant losses in the first half of the year, insurers have remained competitive but cautious, added Marsh. The carriers are generally showing caution on pricing, but are prepared to drop rates on good business, stated the broker. However, Marsh warned that the large level of losses in the first half of 2011 means that there is still the potential for a change in market dynamics this year, especially if there is a further significant market loss. “Across lines of business, insurers priced risks competitively and retained a healthy appetite for new business. Although rates remained relatively stable, reductions were common in many lines. The size of global insurance market capacity remains very strong, but is more challenged in loss-affected regions,” said Dean Klisura, Marsh's US Risk Practices Leader. But, almost every major global market reported less favourable renewal trends for programs with catastrophe exposures, said Marsh. Catastrophe-exposed property programs not affected by losses typically renewed between flat and up 10%, while non-catastrophe exposed programs generally renewed flat. For exposures in high-risk earthquake or wind zones, increases were 10% and above, depending on the results of risk modelling analysis. In many countries with no recent catastrophe losses, decreases were still possible, added the broker. As expected, renewals in countries affected by losses this year generally saw rate rises well above the average. In Japan, rates continued to rise significantly. Even on accounts without losses, there were typically increases of 20% and by as much as 50% on programs that have suffered losses. For renewals in Australia, which suffered from flooding losses earlier in the year, increases of up to 5% were generally seen on programs without losses and not involved in mining. Marsh noted that overall capacity for natural catastrophe risks has remained constant, though some syndicates at Lloyd’s reduced capacity in order to manage their aggregate exposures. It also said that the introduction of the 11th revision of RMS’ hurricane model (RMS 11) is beginning to impact insurers’ ability to be flexible, and in some cases is requiring them to offer less capacity in certain regions. Rates for non catastrophe-exposed property risks were generally stable or down 10% in Europe. In the US renewals were more likely to be flat. Global casualty market capacity remained constant in the third quarter with no reported reductions. Most casualty business renewed either flat or with small deceases. On catastrophe-exposed casualty risks, such as Australian bushfire, increases have been seen and, in some cases, capacity has reduced. With the exception of China and Australia, major markets all reported general declining rates for directors and officers (D&O) liability insurance. Likewise, rates for professional indemnity insurance and for liability cover for financial institutions reduced in almost all major geographies. Some new capacity became available for French financial institutions during the quarter, but this trend will be challenged by the potential for losses from recent events. Commenting on reinsurance market trends, following the Monte Carlo Rendez-vous last month, Marsh said that catastrophe losses have contributed to rate firming for mid-year property catastrophe reinsurance. With the hurricane season ending, barring additional large reinsured losses, property catastrophe reinsurance rates could drift at the January 1 renewals, it added. The European sovereign debt crisis is another risk for re/insurers. Exposure could come through holdings in sovereign securities, corporate bond or equity holdings in exposed companies or in cash holdings, warned Marsh.

Overall corporate insurance rates flat but cat risks rising–Marsh

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