Increases confined to loss-affected exposures: Marsh

Global insurance rate increases were confined to loss-affected exposures, despite record level 2011 Q1 catastrophe losses, according to Marsh.
Market conditions in the quarter changed little in regions and for classes of business not affected by recent losses, since overall insurance capacity remains ample, Marsh’s Spring 2011 Insurance Market Update reports.
Although more difficult to obtain, property rate reductions could still be generally achievable, Marsh observed. Organizations with catastrophe exposures, however – especially those in regions recently affected by large-scale catastrophe losses (in Japan and New Zealand, for example) – are likely see increased rates at renewal.
Many insurers’ and reinsurers’ 2011 budgets for cat losses have already been substantially eroded – if not exceeded – due to the losses in the first quarter, the report says. Additional catastrophe losses could impact reinsurance pricing.
“The global insurance market faces substantial pressure, especially with the upcoming 2011 U.S. Atlantic hurricane season predicted to be more active than usual,” Bowring Marsh CEO Nicholas Bacon said in a release. “Any future catastrophe losses this year are more likely to directly impair the capital positions of reinsurers than impact earnings, which could drive rates higher.”
The introduction of the 11th revision of Risk Management Solutions’ hurricane model – widely used for U.S. hurricane and storm surge risk – will also add to upward property catastrophe pricing pressure, he added.
“Given these changing market fundamentals, there is insufficient support for the continuation of a softening market cycle,” Bacon said.