“Two-speed” global insurance market amidst cat losses and plentiful capacity: Marsh

Capacity in the global insurance market remains plentiful and across the board rate rises are not being seen, despite record insured catastrophe losses of more than $100 billion in 2011, Marsh reported.
In its ‘Global Insurance Market Quarterly Briefing: Q4 2011′ Marsh describes a “two-speed” insurance market, where those areas affected by catastrophes are seeing rate increases and the other areas with low exposure are experiencing rate decreases.
Insurers are responding to the record losses by seeking rate increases on accounts with significant losses and catastrophe exposures. For example, almost half of Marsh’s U.S. property insurance clients experienced rate increases at renewal during the second half of 2011, compared to 31% in the first half, a release from Marsh says.
While most of those rate increases were applied to programs with catastrophe exposure, accounts with little or no such exposure or losses were often able to secure rate decreases during the second half of the year.
“The global insurance market remains well-capitalised and generally competitive,” said Dean Kilsura, U.S. Risk Practices Leader, Marsh. “This year’s record catastrophic losses are resulting in price firming around catastrophe and loss-driven accounts, but there has been no overall change in market pricing. Market fundamentals remain strong.”
The report also noted that countries affected by major catastrophe events during the year saw the largest property catastrophe rate increases in the quarter. In Japan, programs with earthquake risks typically renewed with increases of up to 50%, for example.
In Thailand, where insured losses from flooding around Bangkok are estimated to be greater than $10 billion, programs are renewing with increases of up to 30%.