UK buyers enjoy stubbornly soft general p/c rates but motor climbing

But the motor market appears to be finally on the move as changing periodical payment orders (PPOs, regular payments made for personal injury cases) are expected to raise the cost of claims and compound already rising underlying bodily injury claims. UK property catastrophe renewals saw prices continue to soften throughout 2010 because of excess reinsurer capacity according to Aon Benfield. Prices on January 1 fell by 5–10% on a risk adjusted basis. Additional cover has been bought by insurers to reflect rising exposures while retention levels have reduced on a relative basis, said the broker. Aon said that excess capacity is still evident in the UK and Irish market and it expects the trend to continue this year. “Original rates for personal lines property business have hardened slightly. Commercial lines remain competitive,” commented the broker. hideGuy Carpenter reported that UK property catastrophe reinsurance rates continued to ‘favour’ cedents, with rate on line down 5–10% year on year. The reinsurance broker also reported that per risk programmes were off 5–15% for working layers and high-risk excess programmes, compared to the year before. Willis Re agreed that prices continued to soften in the UK property market as capacity remained ‘plentiful’ with several new entrants, particularly in the Lloyd’s market. The broker said that retentions and limits bought were ‘broadly stable’ and that there was some ‘increased appetite’ for aggregate excess of loss covers among some reinsurance buyers. Willis reported that in the UK motor market layers in excess of £5m are the main worry for reinsurers mainly because of an increase in bodily injury claims and issues related to the PPOs. The broker noted that the attachment point of a programme has a ‘significant bearing’ on the overall rate movement in this area. “Poor original market results in the UK motor market in 2008 and 2009 have led to a sustained increase in original rates that has in turn benefitted reinsurers who have secured a better rate per vehicle on virtually all portfolios,” stated Willis. The broker said that reinsurers believe that this is justified because of the combined effect of the PPOs which may increase the cost of claims and the period of time taken to reach final settlement,general bodily injury claims inflation, diminishing investment returns and increased cost of capital for reinsurers. Willis said that there are also market concerns about a possible review of the discount rate plus the withdrawal of unlimited retrocession capacity by a significant reinsurer (unnamed) that it said has led to further upward pressure on reinsurance rates. “That said, at this juncture with ample capacity available, rates on income are flat with reinsurers only winning increased rates on programmes with higher deductibles where volatility is a concern or where claims experience has deteriorated. In some cases, insurers who purchase at a lower deductible or are able to prove a de-risking of the portfolio have achieved rate reductions,” stated the broker. The original market for UK liability (public and employers’) remains ‘weak’ with rate reductions common, according to Willis. Reinsurer capacity remains strong; reinsurance rates are generally flat with some small reductions where experience is good, it added. “There is evidence that original rates are turning for the better in Irish motor business,” added Willis. “Reinsurer capacity remains strong due to lower frequency and severity than the UK as well as the lack of PPOs despite recent discussions to adopt them. Reinsurance rates in the segment are generally flat on a risk adjusted basis,” continued the broker.

UK buyers enjoy stubbornly soft general p/c rates but motor climbing

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