Broker report sees soft market continuing

Written by Editor, CIR

A spate of natural catastrophes in the early months of 2010 has not yet ended the continuing soft conditions in the insurance market, a broker report finds.

Marketplace Realities & Risk Management Solutions, issued in the US by Willis Group Holdings, suggests that the soft market is likely to be maintained in the immediate future.

"The persistence of the soft rate environment in most lines, however, does not mean the marketplace is static," writes Willis' chairman and chief executive Joe Plumeri in an introduction to the report.

"As these articles attest, the offerings and strategies of insurance carriers are always in motion, and the smart buyer will take advantage of a buyer's market not only to lower costs, but to adjust and improve coverage in ways that promote organizational goals and ambitions."

The report cites improving financial market conditions in late 2009 and early 2010 as boosting insurance industry capital positions. However, the struggling global economy is impacting overall demand and insurers' top-line growth, and underlying underwriting profitability is deteriorating, a trend likely to continue in the near term. Buyers are set to gain from market competition as market churn continues to drive premium rate declines across many classes of business, despite some tempering from recent earthquake losses.

Willis says that the property sector remains soft - and continues to soften - even for risks with high catastrophe exposures, with recent renewal decreases of up to 10% on catastrophe accounts. On casualty, a prolonged soft market continues to be fuelled by aggressive price competition in the face of declining exposures and, in some cases, rate levels.

To retain business, many carriers are lowering their collateral requirements. Umbrella/excess capacity remains plentiful, and rates are approaching historic lows, with claim trends holding steady or worsening. Strategic buyers, focused on managing loss costs that represent up to 65% of the total cost of risk, can expect better programme designs, superior terms and conditions and state-of-the-art service.

The group's Directors and Officers (D&O) specialists comment that a stable D&O marketplace offering new and often expansive terms and conditions may mask changes on the horizon. For now, terms and conditions are improving for buyers in primary as well as excess forms. Willis reports that clients experienced a 24% increase in D&O claims last year over 2008.

The report looks at cyber risks, which are increasing in both frequency and severity due to increased reliance on technology and increased regulation. The market is maturing alongside the risk, with more carriers offering solutions as more companies seek protection. Cyber crime is one of the growing priorities risk managers face and companies seeking catastrophe-level coverage should find the insurance market readily able to meet their needs.

The full report can be accessed free of charge on the group's website at

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