Commercial P&C insurance buyers likely will see a modest improvement in market conditions for the remainder of 2014, attributable to more softening in the property insurance line and an easing of upward rate pressure on many other lines of business, according to the semiannual “2014 Marketplace Realities,” a report from Willis Group Holdings plc, a global risk advisor, insurance and reinsurance broker.

“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,” said Matt Keeping, chief placement officer of Willis North America. “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.”

Property rates likely will fall 10 to 15 percent on average for non-catastrophe-exposed risks. Risks exposed to natural catastrophes, such as hurricanes, likely will decrease 7.5 to 12.5 percent, which is a slightly steeper decrease than predicted in the “2014 Marketplace Realities” forecast that was 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,” Willis said.

Commercial casualty lines likely will experience single-digit rate increases, but with occasional decreases on umbrella and excess rates, Willis said. Primary casualty rates are expected to range from O to +7.5 percent, Willis said, with umbrella casualty rates ranging from -5 percent to +5 percent, and excess rates moving from -7.5 percent to +3.5 percent. Workers’ compensation rates are forecast from -5 percent to +15 percent, with greater increases in states such as California.

Also see Commercial Insurers Ready for Underwriting Automation

Select insurance lines, however, could be affected by external factors, including the uncertainty surrounding 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, which are driving upward movement in select insurance lines.

“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,” Willis said. “Uncertainty around TRIPRA is also impacting workers’ compensation coverage and continues to be the ‘gorilla in the room.’”

For employee benefits, Willis predicts rate increases of 5 to 6 percent for companies that self-insured plans, and increases of 9.5–10.5 percent 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,” Willis said. “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.”

Cyber insurance rates are likely to be flat to up by 5 percent. “While the market remains competitive, particularly for first time buyers, Point of Sale (POS) retailers can expect increases up to 10 percent, driven by recent cyber breaches in the retail sector,” Willis said. “Modest increases are also forecasted for most executive risks lines, crime/fidelity, health care professional, construction, kidnap and ransom, political risk and terrorism insurance.”

Willis said rates likely will 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,” Willis said.

Highlights from the report

  • Property: Non-CAT Risks: 10 percent to -15 percent
  • CAT-Exposed Risks: -7.5 percent to -12.5 percent


  • General Liability: Flat to +7.5 percent
  • Umbrella: -5 percent to +5 percent
  • Excess: -7.5 percent to +3.5 percent
  • Workers’ Comp: -5 percent to +15 percent; up to +20 percent in CA
  • Auto: -2.5 percent to +7.5 percent

Executive Risks

  • Directors & Officers: Flat to +5 percent
  • Errors & Omissions: Flat to -5 percent or more for programs with good loss experience; +5 to +20 percent for programs with poor loss experience


  • Practices Liability: Flat to +5 percent
  • Fiduciary: Flat to +5 percent
  • Cyber: -2 percent to +5 percent; Flat to 10 percent for POS retailers; more competitive for first-time buyers


  • Self-Insured plans: +5 percent to +6 percent
  • Insured plans:+9.5 percent to +10.5 percent

Also see Adoption of Predictive Models Increasing Among P&C Insurers


Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access