U.S. property insurers’ hopes for double-digit rate hikes on catastrophe-exposed insurance programmes following 2017’s record natural catastrophe-related losses could be dampened, as an abundance of both traditional and alternative capital continues to flood the market and weaken the potential for widespread market firming, according to Willis Towers Watson.
In a U.S. property market update, Willis highlighted market conditions that favour buyers, despite 2017’s global natural catastrophes having resulted in estimated insured losses of $143 billion, smashing the previous record of $120 billion in 2011.
However, organisations with catastrophe-exposed properties that have suffered losses are expecting steep rate hikes, between 20% and 25%, catastrophe-exposed programs without losses are likely to see price increases of 10% to 20% and Willis said non-catastrophe-exposed programs can expect renewal pricing to be flat to +5%.
Willis analysts, said; “Make no mistake, the marketplace is still in a state of some flux and should not be considered easy. While the rate increases that we’ve seen and that we predict are modest compared to some initial doomsday scenarios, they are still challenging for buyers.
“Moreover, there is some bleeding of the market-firming into other lines of insurance, which will also challenge buyers. That said, we do not see property rate increases escalating beyond our forecasts, and we think the duration of the current conditions will likely be limited to a few quarters.”
Strong reinsurance market industry capitalization and the continued appetite by alternative capital providers are helping the industry absorb recent losses without major blow outs to firms’ balance sheets.
However, the Willis report said that buyers still face challenges; “For example, property rate increases are expected to vary significantly from the mean, and pricing will depend on an organization’s specific exposure, loss history and occupancy.
“For organizations approaching insurance program renewals, “aggressive marketing” of their insurance programs may be necessary and may involve displacing incumbent insurers to attain the best rates and conditions.”
Thus market competition has kept its momentum into the launch of 2018 and analysts note that underwriters’ attempts to achieve a significant rate hike across the property insurance market have been somewhat diminished, quelling hopes for a widespread and sustained marketplace firming.
