February 7, 2005 by Canadian Underwriter
Despite the tumult of hurricanes, typhoons and tsunamis in 2004, insurers maintained a discipline last year that they hope will carry into 2005, according to the annual “State of the Market” report by broker Heath Lambert.
2004 saw insurers display “a mature and disciplined approached to underwriting”, despite pricing softening in some classes of business. Despite predictions of a speedy return to destructive competition and price under-cutting, “insurers have shown a determination to write business in a manner that benefits all involved”, the report notes. This means rewards only for the best class of risks, but no quarter given to clients who have not taken steps to control risk. Insurers have also shown a determination to walk away from business both new and renewal – which falls outside of their technical pricing parameters.
At the same time, multi-line insurers are trying to find a balance between long and short-tail risks in their books of business.
For 2005, Heath Lambert predicts discipline will be maintained even in the property line, the first to soften, with reductions still in the 10-15% realm, although potentially higher for good risks. Competition may take hold in the casualty line with the need to “achieve challenging budgets” in 2005, as well as increasing capacity. Nonetheless, good quality accounts will still see reductions in the 10-15% area. And employers liability will remain a tough market, with limited capacity and any reductions in price likely to be in the single-digits, the broker says.