ARLINGTON, Va., April 07, 2016 (GLOBE NEWSWIRE) -- A complex commercial insurance market is slowing the pricing declines most buyers have enjoyed for several renewal cycles and raising the likelihood that companies will experience some price increases in various commercial lines of insurance, according to Willis Towers Watson (NASDAQ:WLTW), the global advisory, broking and solutions company, in its 2016 Marketplace Realities Spring Update. The report, published today, serves as a guide for North American insurance buyers preparing for upcoming insurance program renewals and coincides with the Risk and Insurance Management Society’s annual conference in San Diego, April 10 through 13.
Overall, ample capacity in the global insurance marketplace continues to buoy market conditions. However, increased underwriting scrutiny combined with potential challenges stemming from the changing carrier landscape is driving movement in some lines of business.
In the property market, rates are expected to fall for most buyers. But some will find decreases only in the single digits, whereas last year, they might have enjoyed double-digit reductions. Property rates are expected to decline 7.5% to 10.0% for companies without great exposure to natural disasters and 10.0% to 12.5% for those more exposed.
For general liability, rates for the remainder of 2016 are expected to be down –5% to flat; although for buyers with recent claims, increases of 5% to 10% are anticipated. Workers compensation costs are forecast to remain steady, with small increases or decreases for most buyers. In the auto liability line, an increase in the frequency and severity of losses is driving rates up as much as 10%, while notable insurers are reevaluating their appetite or exiting the class of business.
The cyber-insurance marketplace is increasingly fragmented. Cyber-renewals are seeing primary premium increases of 5% to 15% for most buyers, and 15% to 30% for point-of-sale retailers and large health care companies with no losses. Middle-market firms can expect a very competitive marketplace with aggressive pricing and broad policy language. Willis Towers Watson noted that smaller companies tend to hold fewer personal records than their Fortune 1000 counterparts, making the potential losses less severe. Meanwhile, underwriting requirements continue to tighten as carriers seek to understand the culture of an organization and how data privacy is embraced across many operational functions.
In executive risk lines, buyers will continue to find a mix of modest increases and decreases, according to Willis Towers Watson.
Market consolidation in the health care and employee benefit space is poised to alter the landscape further. Benefit plan costs are forecast to increase 4% to 5% for self-insured plans and 7% to 8% for insured plans. Employers continue to pursue a variety of cost management strategies, including increased adoption of telemedicine services, vigilance in managing pharmacy benefits (with a focus on specialty drugs), and assessment of value-based contracting and reimbursement arrangements offered by health plans.
Commenting on the market conditions, Matt Keeping, head of broking for North America, Willis Towers Watson, said, “At the macro-level, the market remains stable and pricing is still considered soft, but we may be starting to see the bottom end of that softening. In property, for example, there’s only so much the marketplace can give back. And while we remain in a period thankfully free of huge mega-disasters, losses line by line have taken their toll on marketplace competition. Plus, with interest rates low, insurance companies remain under revenue pressure.”
New pieces in a changing puzzle
In his introductory comments to the long-standing publication, Keeping addressed the recent shifts in some fundamental market positions brought about by the retractions of one “super carrier” and the arrival of another.
“The changes in the marketplace — the changing puzzle pieces — will force some insurance buyers to consider moves they might otherwise have been content to ignore. That, in turn, will raise the question of how carrier partners are chosen in the first place,” Keeping said.
“In most cases, the selection process involves many considerations. Price, no doubt. But also key are the financial stability of the company, and the culture and personality of the people and institutions involved. Many pieces must fit to solve that puzzle.”
Key price predictions for 2016
| Property | |
| Non-cat risks | –7.5% to –10.0% |
| Cat-exposed risks | –10.0% to –12.5% |
| Casualty | |
| General liability | –5% to flat, 5% to 10% for risks with losses |
| Umbrella/Excess | –10% to flat, 10% for truckers and New York City construction |
| Workers compensation | –2.5% to 2.5% |
| Auto | Flat to 10% |
| Executive risks | |
| Directors and officers | –5% to 5% |
| Errors and omissions | Flat to 10%, 20% to 25% for poor loss experience or loss-prone industries |
| Employment practice liability | Flat to 3%, 5% to 15% in California |
| Fiduciary | –5% to 5% |
| Cyber | |
| 5% to 15%, 10% to 30% for point-of-sale retailers and large health care, competitive for first-time buyers | |
| Aviation | |
| Airlines | –10% to flat |
| General aviation | –20% to flat |
| Benefits | |
| Self-insured plans | 4% to 5% |
| Insured plans | 7.5% to 8.5% |
| Trade credit | |
| Most buyers | Flat to 5% |
| With South American or East European risks | 5% to 10% |
The Marketplace Realities series, which is published in the fall and updated every spring, features market snapshots of property, casualty, workers compensation, employee benefit and all executive risk insurance lines, as well as key specialty lines: aerospace, cyber, construction, energy (upstream and downstream), environmental, health care professional, kidnap and ransom, marine, political, surety, terrorism and trade credit.
The publication is available free of charge on the Insights page of the Willis Towers Watson website, https://www.willistowerswatson.com/en/insights. View a video message from Matt Keeping.
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 territories. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.