Declining property rates and easing of upward property ratepressure across multiple product lines should create a favorableyear for insurance buyers, writes Willis in its 2014 NorthAmerican marketplace report.

Willis expects property rates to fall an average of 10-12percent for non-catastrophe exposed risks and decrease about 5-10percent for risks exposed to natural catastrophes, such ashurricanes. The decline is driven by an influx of alternativecapital to the insurance industry, especially to the catastrophicproperty risk segment.

The spring edition of Willis's Marketplace Realities paperpredicted modest increases for both non-catastrophe andcatastrophe-exposed accounts.

“The reaction has not all been positive, to say the least,especially with respect to the new sources of capital,” writes EricJoost, chief operating officer of Willis North America and senioreditor of Marketplace Realities. “From our perspective we see clearbenefits to these new vehicles, because our perspective is reallythat of our clients. For our clients—insurance buyers—the increasein supply of capital makes a more inviting marketplace.”

Rates are expected to fall across eight lines includingproperty, errors & omissions, aerospace, energy, environmental,marine, surety and trade credit. Willis's previous reportpredicted increases for E&O and trade creditinsurance.

Overall, 14 insurance lines are likely to see rate increases.These include casualty insurance lines including workers'compensation and auto, employee benefits, cyber, executive risks,crime/fidelity, health care professional, construction, kidnap& ransom, political risk and terrorism. Buyers can expectcontinuing single-digit increases, with higher rate hikes in statessuch as California, where worker's comp may be up 20 percent.

Predictions for executive risks vary by line: flat to 5 percentfor D&O, and flat to 10 percent for employment practicesliability and fiduciary coverage. E&O is generallyexpected to decrease, except for 5 to 25 percent increases forprograms with poor loss experience.

In its spring report, Willis predicted steeper rates in theEmployee Benefits space as regulatory changes and employerpreoccupation with health care reform increased health care costs.However, the rate predictions have fallen from 8-10 percentincreases to 6-7 percent increases for self-insured plans and8.5-9.5 percent for insured plans.

PropertyCasualty360