Willis: P/C Insurance Rates Edging Higher

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Some Segments Experiencing Modest Firming but No Uniform Market Hardening

Broker Publishes Spring Update to 2012 Marketplace Forecast for North American Buyers

NEW YORK--(BUSINESS WIRE)-- Willis Group Holdings (NYSE: WSH), the global insurance broker, reports modest rate increases across major and specialty lines of insurance, including Casualty lines and catastrophe-exposed Property programs. The spring update to its 2012 Marketplace Realitiesreport is published by Willis today to serve as a guide for thousands of North American insurance buyers headed to the Risk & Insurance Management Society’s Annual Conference and Exhibition April 15-19 in Philadelphia.

For the Property insurance market, 2011 was a challenging year, with insured global catastrophe losses totaling $108 billion. Revisions to catastrophe modeling tool RMS 11.0 is also putting upward pressure on rates. Catastrophe-exposed accounts saw rates climb an average of 5%-10% in Q4 2011, with many accounts experiencing increases in the 10%-15% range – a trend that has continued through Q1 2012. While Willis expects rates for catastrophe risk to continue to climb throughout 2012, abundant capacity and the lingering weak economy have tempered upward pressure on a broader level.

In primary/umbrella Casualty lines, more than 75% of insureds are seeing modest rate increases on renewal, driven by gradual increases in revenues and rating exposures.

In introductory comments, Willis Chairman and CEO Joe Plumeri suggests insurance buyers taking stock of this complex rate environment take a broad perspective by looking at the change in the cost of risk transfer over the past five years.

Plumeri writes, “We asked our Marketplace Realities authors, specialists in their product areas, this question: If, in 2007, a risk cost $100 to insure, what would it cost to insure that same risk today?”

The answer, approximately $70, implies an aggregate cut in premium income of 30%, a blow the industry has for the most part absorbed successfully, Plumeri explains. “What insurers offer, what they are selling, in the end, is their own resilience.”

“We suggest that risk managers and others in charge of risk mitigation and risk transfer may benefit by taking a similar view of your own work. That, ultimately, is your job as well: ensuring resilience,” Plumeri observes.

Making a case for the value of insurance, Plumeri says, “So as rates may rise here and there and you may need to do something you have not done in several years – present unpleasant news at budget time – keep in mind not just the cost but the value of what you’re buying. You’ve been paying less – in many cases much less – for things that are hard to put a price on: protection, resilience and the freedom from risk that allows you to take chances and achieve what you and your stakeholders want most to achieve.”

The 2012 edition of the annual publication is subtitled “Solid Footing and a Foundation for Growth.” The series is updated every spring. In addition to snapshots of Property, Casualty, Workers’ Compensation, Employee Benefits and all Executive Risks lines, the publication looks at key specialty lines: Aerospace, Cyber Risks, Construction, Energy (upstream and downstream), Environmental, Health Care Professional, Kidnap & Ransom, Marine, Political Risk, Surety, Terrorism and Trade Credit.

Key Price Predictions for 2012

Property
- Non-CAT risks: Flat
- CAT-exposed risks: +7.5% to +12.5%
Casualty
- General Liability: Flat to +7.5%
- Umbrella: +2.5% to +7.5%
- Excess: Flat to +7.5%
- Workers’ Compensation: +2.5% to +7.5%
- Auto: Flat to +10%
Executive Risks
- Directors & Officers: -5% to +5%
- Errors & Omissions: Flat to +5% with good loss experience; +10 to +20% with poor loss experience
- Employment Practices Liability: Flat to -5%
- Fiduciary: Flat to -5%
Cyber: Flat to -5%; more competitive for first-time buyers
Benefits: +8%

The publication is available free of charge on the Publications page of the Willis website, http://www.willis.com/What_We_Think/Publications/.

About Willis

Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world. Additional information on Willis may be found at www.willis.com.