Pricing conditions in the property re/insurance market have continued to harden over and above baseline predictions, with rate increases set to persist through 2020, according to broker Willis Towers Watson (WTW).
The current “micro-hard market” has produced pricing increases of between 50% and 100%, according to WTW’s numbers, with some challenged occupancies even up as much as 400%.
Challenged occupancies include food, manufacturing, dealers open lot, hospitality, primary habitational/multifamily, woodworking, senior living, waste management and schedules with significant catastrophe exposure.
While these conditions are expected to continue through 2020, WTW also believes rate increases and capacity deployment will become more predictable by the end of the second quarter.
However, if major catastrophe activity occurs during the year, conditions could deteriorate and prolong the duration of the seller’s market, it added.
The broker attributed the turn-around in rates to a push for market correction measures by underwriters following two years of combined loss ratios above 100%, alongside the previous prolonged soft market.
While capital remains available, re/insurers continue to reduce overall line size, repositioning deployed lines based on profitability, analysts explained.
Deployed capacity has also tightened significantly on cat-exposed and loss-impacted renewals, which will not generally see the benefits of otherwise healthy market capitalization.
Other factors that have contributed to hardening conditions include a reduction in aggregate exposures, as well as carrier consolidation and market withdrawals, which have accelerated overall market deterioration, WTW said.
However, the broker noted that alternative capital providers are starting to deploy more capital in the reinsurance market, which is likely to have a dampening effect on rates in property insurance over time.
WTW is also seeing upward pressure on cat deductibles, which are returning to 5% with removal of caps, as well as tightening on contingent business interruption (CBI), service interruption and first-party cyber.
