Commercial lines carriers face more challenges in 2011, largely due to soft market conditions that persisted throughout the United States in 2010 and are poised to continue into 2011, according to a report published today by insurance broker and risk management advisor Marsh.
Market drivers, such as a relative dearth of catastrophe losses, are partly to blame, notes the report, “Approach Your Risk with Clear Direction: North American Insurance Market Report 2011.” The annual report provides detailed information on commercial insurance market trends and conditions for all major classes of business and for more than two dozen industry and specialty lines.
“A relatively benign Atlantic hurricane season limited catastrophe losses in the United States, and insurance capacity and competition remained strong,” notes the report.
Other key commercial insurance market drivers from 2009—including intense competition among insurers and abundant capacity—continued through 2010 and are forming market conditions for 2011, notes Marsh.
“Despite a challenging economic environment in many industries, commercial insurance market conditions were largely favorable for insurance buyers throughout 2010,” said Joe McSweeny, president, United States & Canada Division, Marsh. “A relatively benign Atlantic hurricane season limited catastrophe losses in the United States, and insurance capacity and competition remained strong.
“Barring a significant market-changing event, we expect conditions to generally remain favorable for buyers in 2011. Those able to supply high-quality data and that have favorable loss histories and limited catastrophe exposures will obtain the best deals.”
Major findings in the report include:
• Nearly two-thirds of Marsh’s U.S. property insurance clients received a decrease in premium rates in the fourth quarter of 2010, with 29% experiencing a median reduction of at least 10%. On average, property rates declined 4.5% in the quarter. The market is expected to remain competitive in 2011, but could be adversely impacted by global economic conditions and changes to catastrophe models introduced by insurers.
• The casualty market continued to soften in 2010, with insureds typically experiencing consistent and steady rate reductions. General liability rates declined an average of 4.7% in the fourth quarter, with rate reductions for individual insureds depending on risk-specific factors, such as class of business and loss history. While competition is expected to remain healthy in 2011, carriers are beginning to push for rate increases and scrutinize loss experience closely.
• Despite an increase in underlying loss rates actions in California and New York, workers’ compensation insurance remained a buyers’ market in 2010, with average rates declining 5.2% in the fourth quarter. Barring an industry-wide catastrophic event, the market is expected to remain competitive. However, the impact of recently enacted health care reform legislation will continue to be closely monitored by the market.
• The environmental insurance market saw a significant increase in capacity and competition in 2010. As a result, rates fell as much as 40% depending on the type of product, loss history, and environmental conditions of insured locations. The market is expected to remain competitive in 2011, but insurers continue to be concerned about emerging regulatory and legal developments. Areas of particular interest include climate change; financial assurance as mandated by the Environmental Protection Agency; and compulsory environmental insurance required in several countries.
• Directors’ and officers’ (D&O) liability insurance rates for public companies declined an average of 12.2% in the fourth quarter. Rates are expected to remain competitive for attractive risks throughout 2011, but could turn as a result of increased litigation or regulation or a consolidation of major D&O insurers.
Marsh is also publishing Insurance Market Reports for Europe, the Middle East & Africa; Asia; Pacific; and Latin America and the Caribbean. Marsh’s Multinational Client Service will also publish a report on issues for companies in that sector.
