Property/Casualty Insurance Market Continues to Soften While Industry Consolidation is Poised to Alter the Landscape for Insurance Buyers
Cyber and E&O Rates Spike in an Exception to the Downward Trend That Now Includes Casualty
Consolidation among some of the largest insurance carriers is altering the marketplace and insurance buyers, while still enjoying a buyer’s market, will face new choices and the strong possibility that more consolidation and marketplace transformation lies ahead. Meanwhile, primary Casualty rates are falling for most buyers for the first time in the current soft market. Property rates will continue to fall, according to Willis experts, though slightly less steeply because they have fallen for several renewal cycles and do not have much room to drop further.
Relatively benign losses and an oversupply of capacity from traditional and non-traditional sources are fueling current marketplace conditions. In Casualty lines, rates are predicted to fall up to 5% for General Liability, up to 10% for Umbrella/Excess, and see a mix of low single-digit increases or decreases for Workers’ Compensation (with the exception of certain states such as
Property rates are predicted to fall by 10–12.5% for non-catastrophe exposed risks and even more, 12.5–15%, for catastrophe-exposed risks.
The main exception to the overall trend is in Cyber and E&O insurance, where the steadily growing threat of Cyber intrusion and data theft is sending rates upward – as much as 150% for retailers with POS (point-of-sale) exposures.
For Auto rates, most buyers can expect decreases of up to 10%, though less attractive risks may see low single-digit increases.
In the employee benefits space, benefit plan costs are forecast to rise by 4–5% for self-insured plans and 7–8% for insured plans. These increases are lower, however, than those predicted in the spring, reflecting the cost-reducing impact of wellness programs and consumer-driven benefit options.
There is notable movement across other lines of insurance business, according to the report. Airline insurance is now forecast to fall by 15–20%, an accelerated softening, as the industry has absorbed the major losses of 2014 and the sector remains attractive to insurers. Political Risk insurance buyers facing small increases earlier in 2014 and the first half of 2015 are more likely to see rates fall, again a result of insurers competing for market share.
In the Executive Risks lines, buyers will continue to find a mix of modest increases and decreases.
BRINGING THE PIECES TOGETHER
In introductory comments,
“In the short run, consolidation shrinks the market. As two companies become one, the marketplace offers one less piece with which to solve the puzzle of an insurance program…But a smaller market with fewer, larger players also opens up the field to new comers that can focus on smaller, specialized niches in areas of potential growth. So consolidation often yields its opposite by thinning the competition and encouraging the emergence of new puzzle pieces.
“What does this mean for the risk professional? It means the marketplace continues to evolve, which means that new options will need to be understood and investigated and old options given a fresh look. It could also mean that we should challenge insurance carriers to be bolder about the risks they take on.”
KEY PRICE PREDICTIONS FOR 2016
| Property | |
| Non-CAT Risks: | -10% to -12.5% |
| CAT-Exposed Risks: | -12.5% to -15% |
| Casualty | |
| General Liability: | -5% to flat |
| Umbrella/Excess: | -10% to flat |
| Workers’ Comp: | -2.5% to +2.5%; up to +10% in CA |
| Auto: | -10% to +5% |
| Executive Risks | |
| Directors & Officers: | -5% to +5% |
| Errors & Omissions: | Flat to +5% or more for programs with good loss experience; +5 to +25% for programs with poor loss experience |
| Employment Practices Liability: | -3% to +3% |
| Fiduciary: | -5% to +5% |
| Cyber | |
| Flat to +15%; +10 to 150% for POS retailers; more competitive for first-time buyers | |
| Aviation | |
| Airlines: | -15% to -20% |
| General Aviation: | -20% to flat |
| Benefits | |
| Self-Insured plans: | +4% to +5% |
| Insured plans: | +7.5% to +8.5% |
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 insurance 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
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