Due in part to reduced catastrophe losses and the increased supply of capital,
property/casualty insurance buyers can expect to face friendly market
conditions on most lines of business for the remainder of 2015.
But evolving threats generated from a range of risks – cyber attacks,
political instability and a changing climate – pose risk management
challenges for many of these same buyers, according to Willis Group
Holdings in its 2015 Marketplace Realities Spring Update.
Also,
the brokers at Willis note, while buyers should enjoy favorable pricing
and terms in most lines including aviation, there are some exceptions
to the broad downward pricing trend, most notably cyber insurance.
Soft P/C
Willis expects commercial property rates to fall by an average of
12.5 percent to 15 percent for both non-catastrophe-exposed and
catastrophe-exposed risks, due in part to a market flush with capacity,
according to the report, which suggests even further softening could
occur. Insurance carrier appetite for this risk remains strong and with
increased carrier capacity, Willis says buyers are enjoying ample
options in determining where to place their business in 2015.
For commercial casualty lines, capacity also remains abundant. Here
Willis says it expects primary pricing at renewals to be flat. The
pricing environment for workers’ compensation is unchanged, with a mix
of increases and decreases ranging between -5 percent and +5 percent,
though California workers’ compensation rates are expected to climb by 8
percent, which is still low by recent historical standards.
Supply & Demand
The outlook reflects a market that is working as intended, according
to Matt Keeping, chief broking officer, Willis North America.
“Individual experiences will vary depending on industry, geography and
loss history, but overall we anticipate a marketplace that continues to
offer opportunities for buyers,” he said. “With weather and other
catastrophic losses remaining below average for another year, and
capital hungry for a somewhat predictable return, we see the forces of
supply and demand working as expected.”
But, Keeping added, challenges remain for organizations as risk
profiles change. “The threat of cyber-related losses seem to be a matter
of not if, but when; the push for global markets is clashing with the
realities of political upheaval and war in many places on the planet,
making political risks increasingly unavoidable; and even if Nat Cat
losses are down in the aggregate, there is the sense that a changing
climate brings an increased potential for widespread catastrophe in
heavily populated areas.”
Aviation Surprise
According to Willis, the most surprising market softening can be seen
in aviation programs, where significant and high-profile catastrophes
have caught the world’s attention. There is still ample capacity in the
marketplace and excluding these exceptional losses, the industry’s
safety experience remains good, says Willis. These factors have combined
to reverse Willis’ earlier predictions of sharply increased rates for this sector. Insurance buyers can expect renewals to range between flat and +10 percent for the remainder of 2015.
For employee benefits programs, Willis predicts rate increases of 5
percent to 6 percent for organizations with self-insured plans, and 8.5
percent to 9.5 percent for insured plans. Willis brokers say employers
remain focused on elements of the health care reform law that will go
into effect in the next few years, particularly the Cadillac Tax,
effective in 2018, which is expected to affect more employers than
originally anticipated due to the increasing cost of health care.
Cyber, Tech E&O Exceptions
Willis notes cyber insurance is among the some exceptions to the broad downward trend. With cyber breaches increasingly, the demand for stand-alone cyber policies
is dramatically rising. Willis predicts increases of up to 10 percent
for most buyers. However, organizations with point-of-sale (POS)
exposures face 10 percent to 100+ percent increases for primary
premiums. Additional increases are likely in the excess layers of the
program, due to paid claim activity, according to Willis brokers, who
say underwriters are increasing their scrutiny of retailers and other
organizations with POS systems. Adding to the upward pressure, some
carriers in this space have increased their retentions, reduced their
capacity or, in some cases, exited certain sectors, the report says.
Willis also expects rate increases on errors and omissions coverage
for organizations with poor loss experience or difficult industry
sectors currently at risk for large claims and litigation, such as
technology firms. Some environmental insurance programs, particularly
combined environmental plus casualty programs, are experiencing sharp
increases as environmental claims against organizations continue to
trend upward.
In the executive risks lines, buyers will find a mix of modest increases and decreases.
Keeping said organizations will need to “balance the pressure to keep
costs down and the need to maximize resilience for the risk transfer
spend – in other words, to make sure that the organization is
sufficiently protected so that its greater goals can be met.”
The report is expected to be a basis for discussion among risk
management and insurance professionals at the annual Risk &
Insurance Management Society’s Annual Conference, which is being held in
New Orleans this year April 26-29. Below are the report’s key
indications.
Willis: Key Price Predictions for 2015:
| Property |
| Non-CAT Risks: |
-12.5% to -15% |
| CAT-Exposed Risks: |
-12.5% to -15% |
| Casualty |
| General Liability: |
Flat |
| Umbrella/Excess: |
-10% to flat |
| Workers’ Comp: |
-2.5% to +2.5%; up to +8% in CA |
| Auto: |
-10% to flat |
| Executive Risks |
| Directors & Officers: |
-5% to +5% |
| Errors & Omissions: |
Flat to -5% or more for programs with good loss experience; +5 to +20% for programs with poor loss experience |
| Employment Practices Liability: |
-3% to +3% |
| Fiduciary: |
Flat to +5% |
| Cyber |
| Flat to +5%; +10 to 125% for POS retailers; more competitive for first-time buyers |
| Aviation |
| Airlines: |
Flat to +10% |
| Aerospace: |
-10% to flat |
| Benefits |
| Self-Insured plans: |
+5% to +6% |
| Insured plans: |
+8.5% to +9.5% | | |
Source :http://www.insurancejournal.com/news/national/2015/04/16/364670.htm
