Marsh expects favourable U.S. insurance market conditions in 2014

Barring higher than expected catastrophe losses, notes a new report from Marsh, the ample capacity and competition that helped temper firming of commercial insurance rates in the United States in 2013 is expected to continue into 2014.

In its U.S. Insurance Market Report 2014, released Monday, Marsh reports that commercial property insurance prices stabilized for many organizations last year “as a significant surplus of capital among insurers and reinsurers kept competition high.”

As well, despite average year-over-year total directors and officers liability (D&O) program rate increases reaching as high as 3.6% in 2013, “price hikes steadily lost momentum through the fourth quarter and are expected to continue softening in 2014 driven by excess insurer competition,” notes a press release from Marsh, a wholly owned subsidiary of Marsh & McLennan Companies.

The casualty insurance markets also tempered in 2013, as rate increases were generally lower than had been anticipated at the beginning of the year, Marsh adds. It is expected rates in 2014 are “generally poised to renew flat or with increases in the low single digits for insureds in desirable classes of business with good loss experience.”

“Organizations of all sizes and across all industries should generally expect favourable market conditions in 2014 as long as capacity and competition remain plentiful and catastrophe losses remain relatively low,” Dave Bidmead, Marsh’s U.S. CEO, says in the statement.

“However, now is not the time to become complacent. Emerging and quickly evolving risks requires that risk managers stay abreast of the changing market and ensure they are properly protecting their balance sheets and managing their risks for growth,” Bidmead says.

He suggests organizations choosing to incorporate data and analytics within their risk management and risk transfer strategies will generally achieve the most efficient outcomes.

Marsh notes that the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is set to expire on December 31, 2014. “Many organizations with large employee concentrations in big cities are already experiencing significant pressure in terms of availability and pricing of workers’ compensation coverage. The cost of property terrorism insurance also could become volatile if TRIPRA is not reauthorized,” the statement adds.

Some specialty lines of coverage continue to firm, with premium increases of between 5% and 20% for marine insureds that have good loss histories typically expected in 2014. Modest rate firming is also expected in the employment practices liability insurance market, especially for small to mid-size employers.