Demand driven by fears of claims in economic downturn, broker says

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Companies across Europe, the Middle East and Africa (EMEA) are buying higher levels of liability insurance, according to insurance broker Marsh.

The higher interest is being driven by increased fears over possible claims during the economic downturn, coupled with competitive pricing, the broker said.

In its Liability Insurance Buyers Report 2012, Marsh said the limit of liability insurance purchased across EMEA had increased by 7% since 2008, following three previous years of decline.

Since the onset of the financial crisis, the average level of insurance limit in EMEA has risen to €31m (£24.7m) from €29m in 2008, peaking at €32 million in 2011.

In northwestern Europe, including the UK, the average limit purchased for liability insurance has increased by 40% to €56m in 2012 from €40m in 2008.

Marsh’s EMEA casualty practice leader Alain Petit-Lambotte said: “Continuing economic uncertainty has increased the perceived need for the protection insurance can offer, at a time when capacity remains abundant and pricing favourable for many firms.

“Since 2008, most companies have been able to afford the extra liability insurance they have thought it prudent to purchase. But these favourable conditions are being challenged in some regions across EMEA, such as the Middle East and India, where some insurers are applying more stringent underwriting criteria in an effort to counter downward pricing.”

According to Marsh’s data, pricing has decreased by 22% since 2006, while the maximum available capacity for EMEA-domiciled buyers now exceeds €2.5 billion.

But some firms, including pharmaceuticals with US exposures, those with long-tail risks associated with occupational disease or US product liability, and smaller firms whose exposures exceed their revenue, are now experiencing difficulties in securing the liability cover they require. Perceived as a ‘significant risk’, some insurers are instead opting to offer less cover to these firms or apply tougher conditions before they do.