Marsh reports slight decline of insurance rates in Q3, increase in Canada for cat-exposed property rates

Overall insurance rates fell during the third quarter of 2013, though rates in Canada increased for catastrophe-exposed property risks and for directors and officers liability, suggests a new report from brokerage and risk management firm Marsh Ltd.

New York City-based Marsh’s British subsidiary released its Global Insurance Market Quarterly Briefing, which included rate trends during the third quarter for different regions and coverage types. 

“Global insurance rates fell marginally in the third quarter of 2013, driven by decreases in pricing within several regions and across various lines of business,” Marsh stated. “As a result, the Marsh Risk Management Global Insurance Index showed a modest decline.”

That index “represents a composite or weighted average of global rate change activity over the preceding four quarters,” Marsh states.

The briefing included tables with rate changes. For example, in Canada, there was a 0 to 10% increase in property for catastrophe exposed risks. In major market liability, Canada was stable — meaning a rate change of -5% to +5% — for general liability, financial institution liability and professional liability. There was a 0 to 10% increase for directors and officers liability.

“There was a noticeable increase in the movement of senior personnel at insurers to set up new underwriting teams or to bolster existing offerings,” Marsh stated in the briefing. “In addition, sustained competition among a substantial number of markets has seen many insurers issuing updated policy wordings that generally broaden the terms of available coverage. Among emerging exposures in the US D&O arena, regulatory agency enforcement actions against organisations and their executives are at the forefront.”

The third quarter briefing also included a spotlight on the United States Terrorism Risk Insurance Act (TRIA), which essentially requires U.S. carriers to offer terrorism coverage to commercial clients and stipulates that the U.S. government would act as a backstop in cases where losses results from terrorist incidents under certain circumstances.

TRIA “requires $100 million in aggregate industry losses and an individual insurer deductible of 20 percent of premiums before the federal government shares 85 percent of the insured losses,” according to a memorandum from the House of Representatives Committee on Financial Services, which held a hearing Nov. 13 on TRIA.

Three bills that propose to extend TRIA beyond 2014 have been tabled in the U.S. House of Representatives, but none have been passed into law.

“Failure to renew the backstop could result in increased pricing and capacity shrinkage, especially for risks in the central business districts of major US cities,” Marsh warned in its quarterly briefing, adding that some organizations “are already beginning to explore alternative risk transfer approaches if the law is changed or not extended.”

The Committee on Financial Services noted those who oppose extending TRIA “argue that it exposes taxpayers to potentially billions of dollars in losses that the private sector should, some 13 years after (the September 11, 2001 attacks), be prepared to bear on its own.”

Marsh also noted in the report that  “roughly half” of insureds in the U.S. “across major insurance lines saw rate increases at renewal in the third quarter.” Marsh added that to date, hurricanes in the North Atlantic have “produced a low level of insured losses,” but floods in Colorado in September caused economic losses of more than US$2 billion.

Last September, Oakland, Calif.-based EQECAT noted that heavy rains, flash floods and mudslides affected 17 counties containing about 80% of Colorado’s population. At the time of those floods, Aon Benfield noted that Boulder got 231mm of rain between 6:00 p.m. Sept. 11 and 6:00 p.m. Sept. 12. while in Lyons, water had flowed over the tops of at least five dams.