October 9, 2013 by Canadian Underwriter
Willis Group Holdings is predicting an overall decrease in property, marine liability and aerospace insurance rates while at the same time anticipating increases in rates for other lines, such as cyber and kidnap and ransom.
“Willis expects property rates to fall an average of 10-12% for non-catastrophe-exposed risks, while risks exposed to natural catastrophes such as hurricanes will likely decrease in the 5-10% range,” the London-based brokerage and risk advisory firm stated in a press release Tuesday.
The findings were made in the latest Marketplace Realities report, which is published twice a year by New York City-based Willis North America Inc. Marketplace Realities includes “market snapshots” on property, casualty, workers’ compensation, employee benefits, executive risks, aerospace, cyber, construction, energy, environmental, health care professional, kidnap and ransom, marine, political risk, surety, terrorism and trade credit lines.
“Overall, 14 insurance lines will likely see rate increases, while eight will see decreases, according to Willis experts,” the company stated.
In property, Willis characterized loss activity as “light” in 2013, with “notable exceptions,” such as the tornadoes that hit the Oklahoma City area in May and the floods in Central Europe last June.
Willis is also predicting a downward trend in aerospace rates.
“Airline losses remain below the sector’s five-year average,” Willis stated in the report. “No financially catastrophic losses have occurred for several years.”
Kidnap and ransom rate changes are predicted to be flat to +10%. The report mentioned Mexico, Venezuela, Nigeria, Pakistan, Afghanistan, the Philippines, Iraq, Somalia, Syria and Egypt as areas of concern.
“Egypt remains unstable and continues to undergo a transition process that may endure for years,” according to the report. “Civil unrest and terrorism pose significant risks to companies operating there as well as expatriates and business travelers. We anticipate increased rates from insurers due to ongoing security evacuations and potential political detention claims.”
The market in cyber is competitive for first-time buyers, Willis noted, adding it predicts rate changes of -2% to +5% for renewals.
“Rates remain competitive for some, with renewals bringing slight reductions, though with increased losses, markets may be looking for slight increases over expiring premiums,” Willis stated of the cyber market.
Losses covered by cyber insurance have included regulatory fines and penalties, Willis added.
“Cloud computing is becoming a bigger concern for corporations outsourcing critical applications to cloud service providers,” Willis noted. “Contractual indemnifications are important. Underwriters are reviewing.”
Meanwhile, conditions in marine liability are flat to soft.
“In Protection and Indemnity-related business, however, increases have been generally imposed during the 2013 renewal season following deterioration in the claims estimates on some high profile losses such as the Costa Concordia,” according to the report. “The main issue remains the over-supply of capacity, which makes general increases all but impossible. With no change in sight, it is only a matter of time before the soft market takes hold and premium reductions on good, clean business become the norm.”
Willis released its Market Realities report a week after Aon Risk Solutions stated it is predicting rate increases among the 13 mutual insurance associations that form the International Group of Protection and Indemnity Clubs. Put together, those 13 firms provide P and I for about 90% of world’s ocean-going tonnage.
Meanwhile, Willis predicts the rate changes for directors’ and officers’ liability will be flat to +5%.
“Coverage terms and conditions are still competitive,” Willis noted of D&O liability. “The most significant product changes have been in the area of investigations and earlier claim triggers. Coverage for investigations is still generally available solely for individual directors and officers. For the corporate entity, limited coverage for securities-related investigations may be available if linked also to a covered director or officer. More extensive coverage is only available for significant additional premium.”
Rates are also predicted to increase in workers’ compensation, auto, employee benefits, crime/fidelity, health care professional, construction, political risk and terrorism.
In addition to property, aerospace and marine, rates are also predicted to fall in errors and omissions, energy, environmental, surety and trade credit.