Further Firming Expected in US Commercial Insurance Market in 2013: Marsh
NEW YORK -- January 30, 2013
US commercial insurance rates are expected to continue firming in many lines
of business and industry sectors in 2013 as above average losses, subdued
investment returns, and receding reserve releases impact insurers, according
to a comprehensive report published today by Marsh. However, traditional signs
of a conventional hard market are not evident as price increases are not
uniform, capacity is plentiful, and competition among insurers remains
intense, Marsh said in its US Insurance Market Report 2013.
Superstorm Sandy’s effect on the property insurance market will likely temper
what had been a generally improving rate environment for property insurance
buyers in late 2012, Marsh said. Though the full effects of the storm are
still being determined, decreases in property insurance pricing generally are
unlikely in early 2013.
Casualty insurance markets remain in a state of transition entering 2013,
though pricing trends will likely be felt unevenly across various lines of
business and client demographics. Rates for financial and professional
insurance — including directors and officers liability (D&O), commercial
errors and omissions (E&O), and cyber insurance — are also expected to
generally increase in 2013.
“Although Superstorm Sandy will rank as one of the costliest storms in US
history, it is not forcing a rapid hardening of the overall market as
insurers’ capital positions were strong enough to weather the storm,” said
David Bidmead, Marsh’s US CEO. “But the storm has prompted underwriters to
seek clarification of certain definitions and other language in property
policies. In the Northeast and other regions that they did not previously
perceive to be catastrophe-exposed, property insurers are also reconsidering
their underwriting approach and seeking higher rates and tighter terms and
“Many of our clients will face challenging renewals across several lines and
industries in 2013, as insurers continue to adjust their pricing and coverage
offered to maintain profitability. Clients that effectively differentiate
themselves from their peers by providing complete underwriting submissions
with accurate and high-quality data will be best positioned to secure more
favorable terms, conditions, and pricing where possible.”
Marsh’s annual US Insurance Market Report provides detailed information on
commercial insurance market trends and risk issues for all major classes of
business and more than two dozen industry and specialty lines. Other major
findings from the report include:
*Insureds with significant catastrophe exposures renewing programs in the
fourth quarter of 2012 typically saw property rate increases of 5% to 15%.
*The general liability insurance market was generally stable in 2012, with
some moderate firming. Rates at renewal in the fourth quarter typically
ranged from 5% decreases to 5% increases.
*Workers’ compensation rates generally renewed in the range of 5% decreases
to 5% increases in the fourth quarter, with rates generally expected to
increase more in 2013.
*After a decade of steadily declining rates, the D&O insurance market
entered a state of transition in the second quarter of 2012. Pricing at
renewal in the fourth quarter was typically flat to up 10% for publicly
traded companies and flat to up 15% for private companies. Many insurers
appear likely to continue seeking rate increases in 2013.
*Driven primarily by an increase in frequency and severity of claims,
commercial E&O and cyber insurance rates began trending upward in 2012.
Rates for both lines were typically flat to up 5% in the fourth quarter
and are generally expected to continue to climb in 2013.
*Although conditions in the political risk market remained generally
stable, pricing increased in some countries in the Middle East and North
Africa at the end of 2012; this trend appears likely to continue in 2013.
Conditions in the US trade credit insurance market are expected to
continue to favor insureds despite concern about the European sovereign
debt crisis and other global events.
Marsh, a global leader in insurance broking and risk management, teams with
its clients to define, design, and deliver innovative industry-specific
solutions that help them protect their future and thrive. It has approximately
26,000 colleagues who collaborate to provide advice and transactional
capabilities to clients in over 100 countries. Marsh is a wholly owned
subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of
professional services companies offering clients advice and solutions in the
areas of risk, strategy, and human capital. With over 53,000 employees
worldwide and annual revenue exceeding $11 billion, Marsh & McLennan Companies
is also the parent company of Guy Carpenter, a global leader in providing risk
and reinsurance intermediary services; Mercer, a global leader in talent,
health, retirement, and investment consulting; and Oliver Wyman, a global
leader in management consulting. Follow Marsh on Twitter @Marsh_Inc.
Sally Roberts, +1-303-952-9453
Anand Poola, +1-212-345-4292
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