Willis sees potential end to soft commercial risk market in US

The broker said pricing declines that most buyers have enjoyed for several renewal cycles are slowing in a "complex" commercial insurance market, which raises the probability that companies will experience some price increases in various lines. The report was published in time for the annual RIMS conference that took place in San Diego this week. Willis said that, overall, "ample" capacity in the global insurance market continues to buoy market conditions. However, it added that signs of increased underwriting scrutiny, combined with potential challenges stemming from the rapidly changing carrier landscape is driving movement in some lines of business.hideThe broker said that in the property market rates are expected to fall for most buyers. But the pace is definitely slowing, it added. "Some will find decreases only in the single digits, whereas last year, they might have enjoyed double-digit reductions. Property rates are expected to decline 7.5% to 10.0% for companies without great exposure to natural disasters and 10.0% to 12.5% for those more exposed," said Willis Towers Watson. "For general liability, rates for the remainder of 2016 are expected to be down - 5% to flat; although for buyers with recent claims, increases of 5% to 10% are anticipated. Workers compensation costs are forecast to remain steady, with small increases or decreases for most buyers," continued the broker. Willis said that in auto liability an increase in the frequency and severity of losses is driving rates up as much as 10%. Some leading insurers are re-evaluating their appetite or exiting the class of business, commented the broker. Both AIG and Zurich have recently reported poor results in the US commercial auto market and the need for reserving additions. The broker added that the cyber insurance marketplace is increasingly "fragmented". Willis reported that cyber renewals are seeing primary premium increases of 5% to 15% for most buyers, and 15% to 30% for point-of-sale retailers and large health care companies with no losses. Middle-market firms can expect a very competitive marketplace with "aggressive" pricing and broad policy language, said Willis Towers Watson. "Smaller companies tend to hold fewer personal records than their Fortune 1000 counterparts, making the potential losses less severe. Meanwhile, underwriting requirements continue to tighten as carriers seek to understand the culture of an organisation and how data privacy is embraced across many operational functions," stated the broker. In executive risk lines, buyers will continue to find a mix of modest increases and decreases, according to the broker. Matt Keeping, head of broking for North America, Willis Towers Watson, said: "At the macro-level, the market remains stable and pricing is still considered soft, but we may be starting to see the bottom end of that softening. In property, for example, there's only so much the marketplace can give back. And while we remain in a period thankfully free of huge mega-disasters, losses line by line have taken their toll on marketplace competition. Plus, with interest rates low, insurance companies remain under revenue pressure." Mr Keeping suggested there is likely to be some interesting discussions at the RIMS conference and in coming renewals between risk managers, their brokers and insurers as a result of recent dramatic merger and acquisition activity in the risk transfer industry. "The changes in the marketplace - the changing puzzle pieces - will force some insurance buyers to consider moves they might otherwise have been content to ignore. That, in turn, will raise the question of how carrier partners are chosen in the first place," he said. "In most cases, the selection process involves many considerations. Price, no doubt. But also key are the financial stability of the company, and the culture and personality of the people and institutions involved. Many pieces must fit to solve that puzzle," added the broker.

Willis sees potential end to soft commercial risk market in US

Want to read this article?

Read Next

Premium increase moderation in US commercial P/C market continues

Berkshire Hathaway discloses minority $6.72bn stake in Chubb

Alternative solutions and specialty drive Scor’s Q1 growth

US commercial lines sector combined ratio increased to 96.2% in 2023

New head of US cyber at Beazley

Premium increase moderation in US commercial P/C market continues

Berkshire Hathaway discloses minority $6.72bn stake in Chubb

Alternative solutions and specialty drive Scor’s Q1 growth

US commercial lines sector combined ratio increased to 96.2% in 2023

New head of US cyber at Beazley

Want to read this article?

Read Next

Premium increase moderation in US commercial P/C market continues

Berkshire Hathaway discloses minority $6.72bn stake in Chubb

Alternative solutions and specialty drive Scor’s Q1 growth

US commercial lines sector combined ratio increased to 96.2% in 2023

New head of US cyber at Beazley

Related Articles