Global Property Insurance Rates Decline in Second Quarter Amid Strong Capacity

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Property insurance capacity remained strong during the second quarter of 2014, with many existing insurers looking to expand market share, and some new capacity entering the market.

Rates for property insurance fell in most major global regions. Latin America and the Caribbean (LAC) and Continental Europe saw the largest declines, with rates falling by 8% to 9% on average. In Australia, pricing dropped and coverage broadened, with insurers prepared to offer multiyear agreements and multiline packaged deals.

Rates also generally fell for catastrophe-exposed risks. The reduction in primary rates was fuelled by competitive conditions in the reinsurance market, with insurers’ improved treaty renewals benefiting both pricing and terms.

In a bid to improve their results, some catastrophe insurers are diverting capacity to industries and geographies where rates have not fallen as much, favouring specific industry classes. However, in many instances, insureds have increased their self-insured retentions, reducing or eliminating more substantively priced layers on some programmes.

In addition, reductions in the storm-surge component and the expected number of landfalling hurricanes in the widely used catastrophe model from catastrophe-modelling firm RMS (version 13.0) have led to some rate decreases, which have been amplified on programmes with improved data quality.

In the US, competition remained strong, aided by new property insurance market entrants. There is emerging interest among some larger insureds to consider insurance-linked securities, such as catastrophe bonds and collateralised reinsurance. With a lighter-than-average 2014 Atlantic hurricane season predicted, buyers generally were able to secure favourable premiums, terms and conditions, and limits for their property insurance. In the second quarter, rates were down, on average, in the high-single digits.

In Japan, earthquake rates remained stable in the quarter, but were still higher than before the Great Tohoku Earthquake of 2011. Although capacity has remained stable, some major insurers of earthquake risk have announced rate increases for corporate business renewing from July onward, responding to the perceived increased potential of losses following a significant earthquake.

Excerpted from Marsh’s Global Insurance Market Quarterly Briefing – July 2014. For complete details on all the major lines of coverage, read or download the report.

News Source : Global Property Insurance Rates Decline in Second Quarter Amid Strong Capacity
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