The marketplace for property, casualty and other lines of commercial insurance will continue to favour insurance buyers in 2017, particularly those with comprehensive strategic risk management and risk transfer strategies, global advisory, broking and solutions company Willis Towers Watson (WTW) said on Wednesday.
In its Marketplace Realities 2017 report, which serves as a guide to North American insurance buyers preparing for upcoming insurance program renewals, WTW points to a strong supply of marketplace capacity as a key driver in market conditions.
“The ample capacity will likely allow insurers to absorb any increases in natural catastrophe losses in 2016, including those stemming from Hurricane Matthew and the Atlantic hurricane season,” WTW said in a press release. “Despite mostly favourable conditions, some lines of insurance coverage are experiencing rate increases driven largely by growing losses in those segments.” Overall, buyers’ individual risk profiles will dictate the ultimate treatment they receive at the negotiating table, the report said.
“The mix of increases and decreases, while subject to some change line by line, overall remains steady,” said Matt Keeping, WTW’s head of broking for North America, in the release. “The marketplace continues to offer opportunities for buyers, but as always, strategic planning yields the best results. The key point for buyers is to understand the nuances of the market so they can optimize their risk management programs.”
In the property market, the ongoing declining rate trend, which has caused observers to declare for several years that the market has bottomed out, continues, WTW reported. Catastrophe-exposed programs, having led the softening cycle last year, continue to lead the declines. Property rates are expected to decline 7.5% to 10% for companies without significant exposure to natural disasters and 10% to 12.5% for those more exposed.
For general liability, rates for 2017 are expected to be –5% to flat, although buyers with recent claims can anticipate increases of 5% to 10%. In the auto liability line, an increase in the frequency and severity of losses is driving up rates as much as 10%, WTW said. International casualty rates, included in the Marketplace Realities report as a standalone segment for the first time, are predicted to remain flat or fall by up to 10%.
Cyber renewals are facing primary premium increases of 5% to 10% for most buyers and 15% to 20% for point-of-sale retailers and large healthcare companies with no loss experience. For organizations able to demonstrate strong risk controls, premium increases can be softened thanks to increased competition in the marketplace, the release said. Meanwhile, organizations that operate in the middle-market space (annual revenues below US$1 billion) can expect a very competitive cyber market with aggressive pricing and broad policy language, as many carriers are eager to write these accounts.
In executive risk lines, buyers will continue to find a mix of modest increases and decreases, with rate increases driven largely by adverse risk profiles. For example, in the errors and omissions market, large technology companies with new media and service offerings can expect to see rate increases due to expanding global privacy laws. The directors and officers liability market remains robust as insurers roll out coverage enhancements and buyers are obtaining unprecedented value in the trade-off between terms and price, the release added.
“While insurance companies have been struggling to achieve the level of growth that shareholders and industry analysts hope to see, the overall stability of the industry – its ability to absorb losses, pay claims following catastrophes and support sustainable business growth – is a positive sign,” Keeping said.
Yet growth could be driven by other forces, including innovation, Keeping noted. “In our view, exploring the critical intersections between corporate risk, talent and assets offers a unique path to growth. Historically, the industry has viewed these areas of risk in silos, but with a keen vision and the application of sophisticated data and modelling, we can begin to deliver new perspectives on risk that will propel the industry in new directions.”
The Marketplace Realities series, which is published in the fall and updated every spring, features market snapshots of property, casualty, workers compensation, employee benefit and all executive risk insurance lines, as well as key specialty lines: aerospace, cyber, construction, energy (upstream and downstream), environmental, healthcare professional, kidnap and ransom, marine, political, surety, terrorism and trade credit.