New research by Marsh has revealed an average decrease of 11.7% per €1m of cover in liability rates across Europe from 2004 to 2005, providing further evidence of the softening insurance market.
Despite this sharp drop, the research highlights that the number of claims has increased and exposures have remained high in Europe over the past 12 months, reflecting the growing trend of US-style lawsuits and damage awards.
Marsh's 'Limits of Liability 2005' represents the largest ever survey of corporate liability insurance buying.
The key findings of the European report are that the average limits of liability bought in Europe stayed relatively stable over 2004-05, only increasing by 3.1%, despite falling rates.
The report also found that the trend for companies to expand into services, evident in many industry sectors, has increased their vulnerability to accusations of professional negligence.
In the UK, Marsh said the liability insurance market remains more volatile than in the rest of Europe, with average prices falling by 22.3% in 2005 and the average price per €1m of coverage decreasing by 17% to €7,975 in 2005 from €9,608 in 2004.
Guy Malyon, managing director of Marsh's Placement Solutions Practice, said: "With a continued softening of rates, the market has favoured buyers over the last year. Firms have had more options in areas such as retentions, imits and cover, and capacity has expanded significantly in the product liability market due to the re-emergence of several large European insurers.
"However, businesses can take little comfort in falling rates, as claims are increasing in terms of both severity and frequency, and the overall economic impact of hurricanes Katrina and Rita have yet to be factored in.
"Our advice to European businesses is clear: continue with good risk management practice as, even in a softening market, companies that retain a focus on managing risk will achieve a better deal from the insurance industry."
