Willis Towers Watson calls end of soft market in US

Rate increases are on the cards for US commercial insurance buyers in 2018, as a direct result of the recent spate of costly hurricanes. Although market reaction to windstorms Harvey, Irma and Maria is still evolving in the run-up to the 1 January renewals, it is likely that the hit to insurers’ earnings will put underwriters under pressure to raise prices in the US.

“For buyers, this may mean the long soft market for commercial property insurance could be over, at least temporarily, and there may be upward pressure on rates in other lines of insurance,” according to a report from Willis Towers Watson.

There’s growing consensus that insured cat losses will top $100bn, making a market correction inevitable – though the full pricing impact might not be clear until the first or second quarter of next year, Willis Towers Watson warns.

“Rates are forecast to potentially rise 10% to 20% for catastrophe-exposed risks and 20% to 25% for catastrophe-exposed risks with recent losses. Other property insurance buyers can expect flat rates or low single-digit increases, ending what for many buyers have been several consecutive years of annual decreases,” the report states.

Casualty rates will be flat or increase by small amounts as pressure from the recent catastrophe losses spills over into other lines of business, Willis Towers Watson predicts.

Specialty insurance lines of business are expected to follow their own supply and demand curve, however. Buyers should expect flat renewals for terrorism insurance rather than the decreases they have seen in recent renewals, for example. By contrast, the high double-digit increases for combined environmental-casualty programmes have begun to ease.

In the cyber liability insurance market, demand for coverage continues to rise and supply of capacity is “more than keeping up”, according to the report.

Meanwhile in London, price corrections are already taking hold on loss-affected and loss-exposed US property lines business, according to international insurer Hiscox, which has just released its third-quarter management statement. “We are seeing increases of between 10% and 50% and sometimes more,” the insurer said. “In other London market insurance lines, momentum is building ahead of the busy renewal season and reductions are coming to an end.”