Aon: P/C Insurance Rates Decrease, Capacity Continues to Increase

May 27, 2010

Property rates will continue to drop 5 percent to 15 percent for most risks, despite record global catastrophic losses seen in early 2010, according to Aon Corp.’s 2010 U.S. Insurance Market Overview. Property capacity levels are very strong for the industry and will create a competitive market. Most insureds will keep the same limits, deductibles/retentions and coverage, the report says.

The report, generated by Aon Analytics provides the latest information on insurance pricing, limit, deductible and retention trends.

In the casualty insurance sector, insureds with favorable loss history and limited exposure changes will continue to experience flat to single-digit rate decreases, while insureds with less than favorable loss histories and/or significant downward exposure changes may expect rate increases, Aon reports. Most insureds will maintain limits and deductibles/retentions. With capacity at record levels, no significant increase in capacity is expected this year.

The marketplace for directors and officers liability (D&O) also remains soft, the report says, with flat to single-digit rate decreases for most insureds. There will be little change in limits purchased this year and the majority of insureds will maintain deductibles/retentions. With only 49 cases through the first four months of the year, the number of federal securities class-action lawsuits <> was 27 percent lower than in the first four months of 2009, when there were 67 cases.

The employment practices liability marketplace is currently favorable across nearly all industry segments. EPL remains potentially volatile for larger employers (10,000+ employees) due to the continued shortage of primary carriers in the market. We have seen what appears to be an uptick in filings of class-based actions and while we expect this trend to continue for the remainder of the year, the length of time required for such claims to impact carriers will likely result in generally flat pricing for the remainder of the year.

And in the fidelity/crime market, as more claims are filed and paid, rates are likely to stabilize or slightly increase for financial institutions. Most insureds will maintain limits and current deductibles/retentions. Capacity will also level off this year.

As a result of a surge in piracy and kidnappings, the kidnap, ransom and extortion market is currently plagued by unique incidents and losses, Aon reports. Levels of extortion-related incidents are higher than kidnap incidents, and there is a surge in detentions without monetary demands. New capacity in the domestic market and a realignment of existing capital will cause premiums to stabilize and perhaps decline for clients with U.S.-based exposures.

The 2010 U.S. Insurance Market Overview is compiled by Aon Analytics and incorporates data from proprietary Aon databases such as the Aon Global Risk Insight Platform, a repository of global risk and insurance placement information.

To access Aon’s 2010 U.S. Insurance Market Overview, visit

Source: Aon

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