Declining property rates and easing of upward property rate pressure across multiple product lines should create a favorable year for insurance buyers, writes Willis in its 2014 North American marketplace report.

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

The spring edition of Willis's Marketplace Realities paper predicted modest increases for both non-catastrophe and catastrophe-exposed accounts.

“The reaction has not all been positive, to say the least, especially with respect to the new sources of capital,” writes Eric Joost, chief operating officer of Willis North America and senior editor of Marketplace Realities. “From our perspective we see clear benefits to these new vehicles, because our perspective is really that of our clients. For our clients—insurance buyers—the increase in supply of capital makes a more inviting marketplace.”

Rates are expected to fall across eight lines including property, errors & omissions, aerospace, energy, environmental, marine, surety and trade credit. Willis's previous report predicted increases for E&O and trade credit insurance.

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 expect continuing single-digit increases, with higher rate hikes in states such as California, where worker's comp may be up 20 percent.

Predictions for executive risks vary by line: flat to 5 percent for D&O, and flat to 10 percent for employment practices liability and fiduciary coverage. E&O is generally expected to decrease, except for 5 to 25 percent increases for programs with poor loss experience.

In its spring report, Willis predicted steeper rates in the Employee Benefits space as regulatory changes and employer preoccupation with health care reform increased health care costs. However, the rate predictions have fallen from 8-10 percent increases to 6-7 percent increases for self-insured plans and 8.5-9.5 percent for insured plans.

PropertyCasualty360

Instant Insights /

Insurance Buyers to Benefit From Falling Rates, Willis Says

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