Insurers are still vying for lucrative accounts and insurance capacity remains buoyant in Europe, the Middle East and Africa (EMEA), according to a new report published today by Marsh.

However, in some areas rates have increased, and insurers have tightened their policy terms and conditions in the second quarter of 2011, states Marsh’s Approach Your Risk with Clear Direction: 2011 EMEA Insurance Market Midyear Update. As a result, accounts with poor claims histories or with a significant proportion of catastrophe exposures are experiencing tougher market conditions.

Marsh’s report also notes that the EMEA insurance market has not been immune to the effects of recent natural catastrophes that have occurred globally, such as the Australian flooding, the earthquakes in New Zealand and the Japanese earthquake and tsunami.

“While insurers are pushing hard for rate increases, excess capacity in the market is still fuelling competition. Accounts that are not catastrophe exposed or have a good loss experience are highly sought after, resulting in renewal at the expiring premium, or even a discount,” commented Nick Bacon, CEO of Marsh’s international placement operations.

“Catastrophe rates are increasing, as insurers try to recoup their losses. Some clients are choosing to self insure increased amounts of their catastrophe exposures due to rate increases, or because of a reduction in capacity available from insurers.”

According to Marsh’s report, the casualty insurance market remained soft in the second quarter – average rate decreases of 5-10% were observed - and there were no significant losses that could trigger a change in underwriting attitudes in the short term.

Notable exceptions include energy offshore liability, pharmaceutical liability and automobile liability in certain territories where the inflating cost of car repairs is driving up the cost of insurance.

George Davies, UK head of Marsh’s risk management practice, commented: “The tougher stance of insurers is evident across the EMEA region. Some insurers, for example in France and Spain, are no longer offering long term agreements or premium discounts for property; and policies that are not profitable are in the process of being reunderwritten by some carriers.

“This trend will generally continue over the next six months. Client differentiation and indepth analyses are becoming increasingly critical to achieve premium reductions for well managed risks with good loss histories.”

Marsh’s report also notes:

• Financial institutions have benefitted from the continued soft market, despite many claims still outstanding, and are experiencing up to double digit reductions for directors’ and officers’ (D&O) insurance. Large commercial buyers of D&O have experienced rate reductions, and the small and medium-sized segment remains extremely competitive, with many new carriers attracted by the perceived claims-free environment.

• The trade credit insurance market has seen the addition of new insurers and increasing capacities, which has driven reductions in premium rates. However, trade credit insurers have remained cautious overall, due to continuing economic uncertainty.

• Following the credit crisis, sovereign crises playing out in the Eurozone, and ongoing political uncertainty throughout the Middle East and North Africa region, political risks and structured credit underwriting remains cautious. Insurers are following the lead of lenders and investors and are carefully scrutinising which risks to support and in what countries.

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