Further Softening in Property Insurance Market and Easing of Upward Rate Pressure on Many Other Lines; External Factors Fuel Price Increases in Select Lines
Spring Update to 2014 Marketplace Forecast for North American Insurance Buyers Published Today
NEW YORK, April 9, 2014 (GLOBE NEWSWIRE) -- Willis Group Holdings plc (NYSE:WSH), the global risk advisor, insurance and reinsurance broker, expects property/casualty commercial insurance buyers to face a modest improvement in market conditions for the remainder of 2014, due in part to further softening in the Property insurance line and an easing of upward rate pressure on many other insurance lines. Meanwhile, external factors, including ongoing uncertainty around the renewal of the federal terrorism insurance backstop, the impact of the health care reform, political instability across some regions of the globe and high profile cyber attacks, are fueling upward movement in select insurance lines. These are key findings in Willis's semiannual 2014 Marketplace Realities report, published today, as a guide for North American insurance buyers preparing for upcoming 2014 insurance program renewals.
Willis expects commercial Property rates to fall by an average of 10–15% for non-catastrophe-exposed risks, while risks exposed to natural catastrophes such as hurricanes will likely decrease in the 7.5–12.5% range – a slightly steeper drop than Willis initially predicted in the 2014 Marketplace Realities forecast published in October. The downward pressure is being driven by ample capacity, the absence of major catastrophe losses and revised catastrophe modeling which is generating lower loss estimates for windstorm risk.
For commercial Casualty lines, Willis experts are seeing mostly single-digit rate increases but occasional decreases on umbrella and excess rates. Primary Casualty rates are expected to range from flat to +7.5%, with umbrella Casualty rates ranging from -5% to +5% and excess rates moving from -7.5% to +3.5%. Workers' Compensation rates are forecast from -5% to +15%, with greater increases in states such as California. While capacity remains abundant in the Casualty market, uncertainty over the renewal of the federal terrorism insurance backstop (TRIPRA) is creating challenges for some risks with employee concentration exposures in the largest U.S. cities. Uncertainty around TRIPRA is also impacting Workers' Compensation coverage and continues to be the "gorilla in the room," the report said.
In the Employee Benefits space, Willis predicts rate increases of 5–6% for organizations with self-insured plans, and increases of 9.5–10.5% for insured plans. These rate increases are being driven by an increasing prevalence of chronic disease within the covered population, an increase in medical costs per service in response to concerns over lower provider reimbursements related to health care reform, and the expansion of coverage pursuant to health care reform.
Employers continue to struggle with the implementation of health care reform as mandated by the Patient Protection and Affordable Care Act (PPACA) and the related uncertainty in the marketplace due to delays with various aspects of the legislation, such as the employer mandate.
Willis also expects small rate increases for Cyber Insurance buyers in the range of flat to 5%. While the market remains competitive, particularly for first time buyers, Point of Sale (POS) retailers can expect increases up to 10%, driven by recent cyber breaches in the retail sector. Modest increases are also forecasted for most Executive Risks lines, Crime/Fidelity, Health Care Professional, Construction, Kidnap & Ransom, Political Risk and Terrorism Insurance.
Meanwhile, Willis expects rates to decrease in the Errors & Omissions, Aerospace, Energy, Marine, Surety and Trade Credit insurance lines. Environmental insurance is expected to see a mix of increases and decreases depending on the type of product and the risk.
"Overall the outlook for insurance buyers for the remainder of 2014 is largely favorable as upward pressure on rates levels off," said Matt Keeping, Chief Placement Officer of Willis North America. "The marketplace is fluid and we continue to see new capacity entering the market as well as new entrants deploying capital across a variety of lines – all of this combines to keep competition fairly strong. While some external factors are causing disruption and rate increases in select areas, we encourage insurance buyers to seek options on their insurance programs to obtain the best possible conditions as they prepare to effectively protect their assets."
Key Price Predictions for 2014:
| Property | Non-CAT Risks | -10% to -15% | |
| CAT-Exposed Risks: | -7.5% to -12.5% | ||
| General Liability: | Flat to +7.5% | ||
| Umbrella: | -5% to +5% | ||
| Casualty | Excess: | -7.5% to +3.5% | |
| Workers' Comp: | -5% to +15%; up to +20% in CA | ||
| Auto: | -2.5% to +7.5% | ||
| Directors & Officers: | Flat to +5% | ||
| Executive Risks | 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: | Flat to +5% | ||
| Fiduciary: | Flat to +5% | ||
| Cyber | -2% to +5%; Flat to 10% for POS retailers; more competitive for first-time buyers | ||
| Benefits | Self-Insured plans: | +5% to +6% | |
| Insured plans: | +9.5% to +10.5% | ||
The Marketplace Realities series, which is published in the fall and updated every spring, features market snapshots of Property, Casualty, Workers' Compensation, Employee Benefits and all Executive Risks lines, as well as key specialty lines: Aerospace, Cyber Risks, Construction, Energy (upstream and downstream), Environmental, Health Care Professional, Kidnap & Ransom, Marine, Political Risk, Surety, Terrorism and Trade Credit.
The publication is available free of charge on the Publications page of the Willis website, http://www.willis.com/What_We_Think/Publications/. To view a video interview with Matt Keeping, click here.
About Willis
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 18,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world's leading authorities on analytics, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our Website, www.willis.com, our leadership journal, Resilience, or our up-to-the-minute blog on breaking news, WilllisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.