Current hard market in financial institutions (FI) insurance not likely to last beyond 2010: Willis

The current hard market for financial institutions (FI) insurance is unlikely to last until the end of 2010, according to the latest Willis FI Index from Willis Group Holdings (NYSE: WSH), a global insurance broker.
Willis’ 2009 Q4 FI market update, published by FINEX Global, notes the current FI hard market saw premiums go up at renewal by a minimum of 10% to 15%.
“The question that everyone wants to get an answer to is how long will these conditions last?” says Duncan Holmes, managing director of FINEX Professional Risks.
“To generate the environment necessary for a ‘softer’ market, there needs to be both an excess of capacity and a willingness from insurers to compete for business. 
“We are going to see new capacity enter the market in 2010, but at the moment, most financial institutions insurers are committing their capacity with great care and caution and will continue to do so until they have confidence that the amount of new losses is going to fall considerably, and stay at a lower level.”
But “the current state of affairs cannot last forever and at some point in 2010 we expect confidence levels to increase.” Willis says.
FI clients may see premium spikes at the beginning of 2010, the report says, because insurers will be looking to share the pain of expensive reinsurance renewals.
Some reinsurers experienced loss ratios of up to 300% over the last two years, the report says.
At the same time, Willis predicts “some green shoots may emerge in the small- to medium-sized financial institutions sector, where those with claim-free histories will drive competition between insurers, resulting in premium reductions. ”
The full text of the Willis FI Index report can be found at:
http://www.willis.com/Documents/Publications/Industries/Financial_Institutions/FI_Index_Q4_2009_FINAL.pdf.