Insurance markets are in a relative state of calm and commercial insurance buyers are benefitting from generally stable pricing, global insurance broker Lockton says in a new report.
In its overview, Lockton reports that U.S. property/casualty insurers saw results rebound to show a small profit in the first half of the year, after seeing an operating loss in the first quarter. Underwriting losses have declined since last year, but shrinking written premiums continue to pressure results.
While underwriters have greater incentive to maintain pricing discipline than during the last several years, competitive pressures have, by and large, not allowed insurers much room to increase rates, Lockton says.
While a number of negative events hit insurers hard during the past year, this has not yet resulted in a broad hardened market. Lockton reports that variation by line and industry continues, and some of the more difficult markets during the past six months may become less volatile. Ample capacity will likely extend the favorable market in most lines for companies that have strong financials and clear loss histories.
According to Chris DiLullo of Lockton Financial Services, the current directors and officers liability insurance environment is characterized by an ever growing landscape of new capacity for commercial organizations. “An oversupply of capacity for both public and private organizations has prevented a hardening of the market in 2009 in the commercial sector,” DiLullo says. “However, the environment for financial institutions has deteriorated during the past several years.”
In the property market, only clients with exposure to catastrophes have seen premium increases. “Premium increases were not as bad as we first feared,” said Jim Rubel of Lockton’s Global Property Practice. “Clients that were not exposed to catastrophes and had minimal losses generally saw only flat to moderate increases in their rates.”
Mark Moreland of Lockton’s Risk Management team notes that most casualty buyers continue to see favorable renewals, which is often s a result of competition. “Carriers have continued to employ a bifurcated pricing model for existing and new business,” Moreland believes. “Many carriers have attempted to raise rates for existing business, while at the same time aggressively pricing new business.”
Source: Lockton Market Update
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