Lockton: Soft Market Pricing Continues to Benefit Insurance Buyers

April 19, 2010

Commercial insurance buyers continue to benefit from lower prices and steady or increasing insurance capacity in property/casualty markets, reports the nation’s largest insurance broker.

In its newly published Lockton Market Update, global insurance broker Lockton, also says the U.S. employee benefits marketplace has become much more turbulent in light of the recently enacted health reform law.

Lockton reports that U.S. P/C insurers are seeing profits rebound with fewer catastrophes in 2009 and increasing investment returns. Lockton noted that insurers’ higher profits were achieved in spite of the continuing trend of declining premiums written. Such competitive pressures are benefitting buyers who have more choices in the market, the broker said.

The P/C industry’s surplus also has rebounded to near pre-recession highs, Lockton said. “Supply continues to chase lower levels of demand.”

Most insurance buyers continue to have reduced exposures due to the impact of the economy, Lockton added. Pressure on insurers to retain business may present a favorable scenario for buyers.


According to Lockton, the continuing soft marketplace characterized by declining prices and strong carrier competition and choice as well as improving terms and conditions, has led to a very competitive casualty market.

“The insurance market across all global regions and classes is generally still competitive, with no real signs of a hardening market,” the broker said.

Mark Moreland of Lockton’s Risk Management team says the environment is increasingly forcing buyers to market their business to attain the best deal. “Carriers have consistently generated solid retention rates over the past several years, but they may be asked to concede more today to retain the business given the dynamics of the marketplace.” Such conditions deliver a very favorable environment for insurance buyers, the broker said.

Also noted, in the current credit environment, buyers are seeking to minimize collateral. “This places more carrier emphasis on retaining its existing business and has caused carriers to drop prices, sometimes significantly,” the report said.

Financial and Executive Risks

Lockton’s Gary Phillips and Rodger Laurite report that director’s and officer’s, employment practices liability and fiduciary insurance markets show no signs of hardening. They write that “there are exceptions and differences depending on public versus private, large versus small, financial institutions versus commercial risk, but the theme for most risks, with the exception of some financial institutions, is general stability and softness.”


Jim Rubel of Lockton’s Global Property Practice observes that insurers are choosing to lock in what business they can, even at a discounted price, rather than hold the line on price and lose good business to a competitor. “Natural catastrophes are the wildcard in this equation,” Rubel adds. “As certain insurers reassess their risk appetites, they are cutting capacity primarily on accounts with exposure to natural catastrophes. New players have emerged in the primary property insurance marketplace to help mitigate these capacity constraints, and, so far, there is still adequate capacity to complete renewals with favorable renewal terms and conditions.”

Employee Benefits

Ed Fensholt, JD, of Lockton Benefit Group comments that the health reform law is causing firms and insurers to re-evaluate their programs. Fensholt cautions against hasty decisions, adding “Your first step is to take a deep breath. There is a lot of information to absorb in this new law. We expect specific guidance on the law in the coming weeks, and we are still early in the process.” Lockton is hosting free Health Reform Summits with additional insights for employers.

Lockton’s online update includes snapshots of 32 markets showing the latest trends facing risk managers, chief financial officers, human resources leaders and other executives. The report also provides in-depth analysis of global insurance markets, including aviation, international casualty, international property, financial risks, and cyber liability.

To obtain free copies of Market Update, visit http://www.locktonmarketupdate.com.

Source: Lockton

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