Commercial property rates are anticipated to decline an average of 10 to 12 percent for non-catastrophe-exposed risks, and risks exposed to hurricanes and natural catastrophes likely will decline 5 to 10 percent, as a result of an influx of alternative capital to the insurance industry, according to the semi-annual 2014 “Marketplace Realities” report from Willis Group Holdings plc, a global risk advisor, insurance and reinsurance broker.

“The reaction has not been all positive, to say the least, especially with respect to the new sources of capital,” said Eric Joost, COO of Willis North America and senior editor of the report. “We see clear benefits to these new vehicles, because our perspective is really that of our clients. For our clients – insurance buyers – the increase in supply of capital makes a more inviting marketplace,” he added.

The forecast represents a significant departure from expectations described in the spring edition of the “Marketplace Realities” report, which forecasted modest decreases for non-catastrophe exposed risks and rate increases for catastrophe exposed accounts.

Willis said many commercial casualty insurance lines likely will experience rate increases, and eight likely will experience decreases. The expected level of rate increase, in many cases, is moderating, and forecasts for some lines of business have reversed since the spring 2013 version of the report, Willis said.

Errors and omissions and trade credit insurance now are expected to decrease moderately or remain flat. Political risk and terrorism, are now forecast to increase, as “market hardening forces are gathering momentum,” Willis said.

Willis forecasted rate increases for casualty insurance lines, including:

  • Workers’ Compensation
  • Auto
  • Employee Benefits
  • Cyber
  • Executive Risks
  • Crime
  • Fidelity
  • Health Care Professional
  • Construction
  • Kidnap
  • Ransom
  • Political Risk
  • Terrorism

Willis forecasted rate decreases for:

  • Property
  • Errors & Omissions
  • Aerospace
  • Energy
  • Environmental
  • Marine
  • Surety
  • Trade Credit

In the employee benefits space, Willis said employers continue to be preoccupied with health care reform, where regulatory changes could contribute to increases in health care costs. However, rate hike predictions for employee benefits are down from earlier this year, having slowed to 6 to 7 percent project increases for self-insured plans and 8.5 to 9.5 percent for insured plans; in the spring, Willis had forecasted overall increases of 8 to 10 percent.
Joost said in the report that the insurance industry continues to evolve. “It’s the advent of big data, insurance style – the increased access and ability to work with the data related to the possibilities of risk transfer,” Joost said. “Big data will be a source of much innovation in the years ahead.”

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