Commercial Market to Remain Stable, Challenging for Risk Managers

Marsh Sees Insurer Security, Transparency, Accountability as Issues

Despite the global economic crisis, the commercial insurance market is poised to remain stable through 2010, but new challenges are emerging for risk managers, according to a report issued by insurance broker Marsh.

The financial crisis has brought risk management to the fore within and beyond finance and treasury departments and global risk managers are being challenged by new boardroom demands of insurer security, balance sheet transparency, and heightened accountability, according to Marsh’s report, “Competition Nets Rewards – Multinational Client Service Insurance Market Report 2010.”

“With the ever-increasing complexity of global exposures, successful risk management today depends on timely information, regulatory awareness, and thoughtful anticipation of the range of local and global scenarios,” said Hank Allen, president, Marsh Multinational Client Service. “For global risk managers, the extent of their visibility – extended to the highest levels of their organizations – is the new world of financial risk and accountability.”

Marsh’s report indicates the continuation of stable market conditions in 2010, as illustrated by the following regional trends.

Intense competition among insurers, increased capacity, and fewer insured catastrophe losses kept U.S. insurance markets generally stable in 2009. Barring a large catastrophic event, property insurance markets will likely continue to stabilize and premium rates will moderate in 2010.

Clients across Europe, the Middle East and Africa were able to secure premium rate reductions for most classes of business in the second half of 2009, but there is evidence of rising loss ratios in many lines of business – which could prompt carriers to review pricing. Local markets are generally expected to stabilize over the course of 2010.

Despite large natural catastrophe losses in Pakistan, the Philippines and Indonesia, Marsh expects most Asian markets to remain soft throughout 2010.

Stability in Latin America and the Caribbean is expected to continue, and insurers appear well-positioned to provide solutions to emerging exposures, though significant concerns remain: natural catastrophes, volatile political and economic environments, safety concerns linked to drug cartels, and dependence on international markets for large and complex risks.

With no signs of a change until the end of 2010 or possibly into 2011, Canada’s market remains soft.

Marsh expects buyers to continue enjoying relatively favorable market conditions in Australia.

Tax Regulations

Marsh’s report further indicates a need to monitor global insurance and tax regulations, which are being enforced more vigorously than in the past. In the European Union, Canada and elsewhere, tax authorities have begun to challenge multinational companies’ insurance programs with a view to assessing and collecting unpaid premium-related taxes.

Risk managers should also monitor several local trends, according Marsh’s report:

• New regulations in the EU have impacted rates.
• Diversification of many carriers in Latin America and the Caribbean.
• Brazil is a strong growth target for insurers in personal lines, life and health.
• A greater focus on underwriting profit in China has led to a reduction in capacity among local insurers for property and construction insurance.
• Clients in India are now facing premium increases.

Topics Carriers Legislation Commercial Lines Europe Business Insurance Risk Management