Marketplace changes afoot but prices remain under pressure
Broker Willis’s Marketplace Realities & Risk Management Solutions warns that the soft insurance market will continue despite an increase in the number of natural catastrophes in early 2010.
Willis chairman and CEO Joe Plumeri writes in the report: “The persistence of the soft rate environment in most lines, however, does not mean the marketplace is static.
“The offerings and strategies of insurance carriers are always in motion, and the smart buyer will take advantage of a buyer’s market not only to lower costs, but to adjust and improve coverage in ways that promote organisational goals and ambitions.”
The Property sector continues to soften, even for risks with high catastrophe exposures. Buyers have seen decreases of up to 10% on catastrophe accounts.
The long soft market continues to be fueled by aggressive price competition in the face of declining exposures and, in some cases, rate levels. To retain business, many carriers are lowering their collateral requirements.
Umbrella/excess capacity remains plentiful, and rates are approaching historic lows, with claim trends holding steady or worsening. Strategic buyers, focused on managing loss costs that represent up to 65% of the total cost of risk, are likely to be rewarded with better program designs, superior terms and conditions and state-of-the-art service.
Insurers are offering new and often expansive terms and conditions but Willis clients experienced a 24% increase in D&O claims in 2009 compared with the previous year, so expect changes.
Cyber risks are increasing in both frequency and severity. The market is maturing alongside the risk, with more carriers offering solutions as more companies seek protection. It is a priority for businesses.
It’s a buyer’s market for all Construction coverages, including Workers’ Compensation, Builders Risk, Professional Liability, Environmental, and others.
Surety products should prepare for the worst as a long-anticipated loss cycle may be imminent. Although year-end 2009 data is not yet available, it is likely the Surety industry experienced contraction in its top line for only the third time since 1997. Yet no significant changes in overall industry pricing are anticipated in 2010, unless loss activity rises suddenly.