Analysts at Willis Towers Watson (WTW) have said the cyclical nature of pricing in the re/insurance market is set to be “proven again” as prices look ready to decelerate over the coming months.
A new report by the broker noted that property rate increases have not been as steep as many predicted last year, although the severity of re/insured losses will likely maintain pressure on rates for the remainder of 2021.
However, according to WTW, property rate increases will be lower than predicted last autumn for 10 lines of insurance and about the same as predicted for almost half the lines.
Only a handful of lines are expected to see higher increases, and some of those just slightly higher, it added
“With higher rates attracting new entrants and coaxing some capacity to come off the sidelines, rate increases are beginning to decelerate, or at least stop climbing,” said Joe Peiser, global head of Broking, Willis Towers Watson. “It’s still a hard market, but to a large degree, the hard/soft market cycle is — or will soon be — proven again.”
Other notable dynamics to the market this year include more predictability, WTW says, with rates approaching technical adequacy in some lines and sectors, as new capital has entered the marketplace.
Analysts similarly noted the emergence of a two-tiered market, with prices varying considerably between “better” and “poorer” risks.
“Because this hard market has been characterized by uncanny underwriting discipline, it’s important for insurance buyers to differentiate themselves into the good tier,” Peiser explained. “Buyers and brokers should fight analytics with analytics to differentiate good risks from others in an insurer’s portfolio.
As for specific lines, non-challenged property lines are forecast rate increases of just 5% to 15% now, down from expectations of 15% to 20% last autumn. For challenged lines, the range has dropped from 30% or more to 20% or more.
General liability predictions remain at 7.5% to 15%, while casualty excess rate prediction have fallen by half for both high hazard and low to medium hazard buyers, at 75% and 50%, respectively.
WTW also reported that rates for workers’ compensation lines continue to remain low, while auto rates increases remain plateaued at 8% to 15%.
Finally, directors’ and officers’ liability increases are decelerating, with pricing increases for public companies predicted to be at around 10% to 40%, versus 20% to 50% last autumn, and pricing increases for private/nonprofit firms to be at 5% to 45%, versus 10% to 50% previously.
“Risk differentiation always begins with a strong commitment to risk management,” Peiser concluded.
“We strongly believe that providing exposure data that is both current and developed with rigor paves the way for better renewal outcomes. High-quality data are also a necessary input for updated analytics and modelling.”