According to Aon’s first “Global Market Property Tracker” the “slide in international property insurance rates” appears to be continuing despite “a number of terrorism incidents around the world and the worst year on record for natural disasters.” The only exceptions Aon noted were in “US based property or energy risks.”
The report states: “While the average rate for international property risks saw an increase in average reduction from 14 percent to 17 percent over the course of 2005, US non-marine property rates moved from an average mid-year decrease of 10 percent to an average increase of 37 percent by the year end in the wake of hurricanes Katrina, Rita and Wilma. According to Aon, non-marine property premiums are likely to continue their downward trend this year and the bottom of the cycle may not be felt until the end of 2007.
“But for US-based risks, rates are currently increasing between 20 percent to 40 percent for those clients with catastrophe exposures. For clients with no catastrophe exposures rates are generally stable.”
Commenting on the Tracker’s findings, Oliver Schofield, director of Aon’s Global Property Practice Group, observed: “A clear divide is opening up between US and international risks and this is likely to be a main feature of the global property market in the coming year.” However, he warned potential investors in the sector that, “with an active hurricane season forecast for 2006, investors hoping to make a quick return on North American business are likely to be unlucky. They will need to build a more diverse global portfolio of business if they want to avoid significant losses when the hurricane season starts.”
Using analysis from Aon’s experts around the world, the “Global Property Tracker” also noted the following trends in specific regions:
— Asia – customer loyalty to their insurer partners remains strong
— Europe – buyers are price sensitive and rates are expected to continue falling during 2006, albeit at different degrees from country to country
— London market – despite being hit hard by last year’s hurricanes, underwriters continue to offer aggressive rates for well risk managed business outside the US
— Bermuda – underwriters will need to soften their current rating stance towards non-US clients if they want to maintain global diversity in their portfolios of business
— US – underwriters are increasing rates across the board and limiting catastrophe cover
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