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Friday, April 20, 2012

Price hikes predicted for property coverage

LIAN BATANGAS PROPERTY by jorgeborja_ph
LIAN BATANGAS PROPERTY, a photo by jorgeborja_ph on Flickr.
Commercial insurance buyers can expect to pay more for certain types of coverage this year, according to separate reports released last week.

An analysis by London-based Willis Group Holdings P.L.C. found property/casualty insurance rates increasing modestly in several lines of business.

"Marketplace Realities" said catastrophe-exposed accounts, which saw rates climb an average of 5% to 10% in the fourth quarter of 2011, look to exhibit a similar trend this year with increases in the range of 7.5% to 12.5% (see box).

These numbers largely reconcile with findings also released last week by New York-based Marsh & McLennan Cos. Inc.'s Marsh Inc. unit. Marsh's report, "Global Insurance Market Quarterly Briefing: Q1 2012," notes that rates for catastrophe-exposed U.S. property risks generally increased 10% to 20% in the first quarter of 2012.

Both brokers say the rising rates are a direct result of high insured losses in a series of catastrophes last year, such as the Tohoku earthquake that struck Japan and the floods that inundated Thailand.

Willis said the $108 billion in insured catastrophe losses worldwide last year combined with revisions to Risk Management Solutions Inc.'s U.S. hurricane model have put upward pressure on rates for cat-exposed property. Countries struck by natural disasters last year have seen the greatest increases, rising more than 30% in Japan and New Zealand.

"The global commercial property insurance market is continuing to show signs of upwards rate trends, especially for catastrophe-exposed risks," Dean Klisura, U.S. risk practices leader for Marsh, said in a statement.

Another line where rates are expected to rise is workers compensation. In its report, Marsh said the rates will rise as the frequency and severity of claims continues to grow. Likewise, Willis projects that workers comp rates will increase 2.5% to 7.5% this year.

"About 90% of insureds are experiencing rate increases on renewals," the Willis report states. "This continues to be most prevalent in California and the Northeast."

The brokers differ on rates for property risks that are not exposed to catastrophes.

Marsh said rates typically rose up to 10% in the first quarter this year, while Willis said it expects such rates to remain flat.

"In the U.S., the property market continues to be in a state of transition with insureds more likely to experience rate increases than those renewing with flat or modest rate decreases," Mr. Klisura said. "We believe that this trend will continue in the short term, with the average rate of increase continuing to rise month over month."

The brokers agree that the U.S. insurance markets remain well-capitalized. Willis said it expects the abundant capacity and lingering weak economy to temper upward pressure on rates.

Source Citation
"Price hikes predicted for property coverage." Business Insurance 16 Apr. 2012: 0003. Insurance and Liability Collection. Web. 20 Apr. 2012.
Document URL
http://go.galegroup.com/ps/i.do?id=GALE%7CA286947271&v=2.1&u=22054_acld&it=r&p=PPIL&sw=w

Gale Document Number: GALE|A286947271

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