Commercial Property Rate Hikes Ease But Insurance Buyers Still Face Upward Pricing Pressure for Remainder of 2018 - InsuranceNewsNet

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April 29, 2018 newswires No comments Views: 34

Commercial Property Rate Hikes Ease But Insurance Buyers Still Face Upward Pricing Pressure for Remainder of 2018

Targeted News Service (Press Releases)

ARLINGTON, Virginia, April 12 -- Towers Watson, an advisory, broking and solutions company, issued the following news release:

Commercial property insurance rate increases are easing off initial spikes following 2017's record natural catastrophe (cat) losses, but commercial insurance buyers still face upward pricing pressure on many lines of business for the remainder of 2018, according to leading global advisory, broking and solutions company Willis Towers Watson's (NASDAQ: WLTW) 2018 Insurance Marketplace Realities -- Spring Update report (formerly titled 'Marketplace Realities'). The report, published today, serves as a guide for North American insurance buyers preparing for upcoming insurance program renewals.

Overall, the property/casualty marketplace remains well capitalized, buoyed by the strong appetite of alternative capital providers. The ability for the industry to recover and recapitalize swiftly following 2017's record natural cat losses -- without widespread hardening or any insurer insolvencies -- demonstrates a new level of resilience, said Joe Peiser, head of Broking, North America, Willis Towers Watson, in introductory comments.

While a resilient marketplace is positive news for buyers in the long term, most buyers can expect their insurance spend to rise in 2018, although not as dramatically as some expected last quarter. Dynamics within individual lines of business are nuanced, with many lines experiencing a mix of price increases and price decreases.

Key findings

Property: Buyers may experience rising prices in response to the 2017 cat losses; however, predicted rate increases have moderated since Willis Towers Watson published its November report, and some buyers will be able to contain increases to a modest level or even obtain small decreases. For buyers approaching renewals, aggressive marketing may be rewarded, although that could involve displacing an incumbent insurer. Pricing forecast: non-cat exposed -5% to +5%; cat-exposed +5% to +15%; cat-exposed with losses +15% to +20%.

Casualty: Many thought that the property catastrophes would have a knock-on effect in the casualty market, which has been struggling with profitability issues. However, to date we have not seen a widespread increase in casualty rates, at least not of the magnitude that insurers' rhetoric implied, but certain lines of business remain challenging. Buyers will experience incremental upward pressure on general liability, umbrella and excess liability lines. Our current forecast reflects a slight uptick from the price prediction we offered last fall. Pricing forecast: flat to +4%.

Auto Liability: Ongoing market challenges exist in this space, and two years of steady price increases have not kept pace with loss trends and adverse developments. Rates are expected to rise more steeply, and some buyers may even see double-digit increases. Pricing forecast: +5% to +9%.

Health Care Professional Liability: The marketplace for the long-term care and senior living facilities sectors is growing more complicated. Rising frequency and severity of claims in these sectors is putting tremendous upward pressure on this line of business. Some carriers have exited the market due to adverse underwriting performance. Pricing forecast: +5% to +20%.

Cyber: Global ransomware/extortion claims dominated 2017, and resulting costs are estimated to exceed $5 billion, a 15-fold increase in two years. Yet new capacity continues to keep the marketplace largely competitive; renewals for primary and excess cover are averaging single-digit increases. Insurers have tightened pricing and increased self-insured retentions and deductibles for companies that have not addressed vulnerabilities. Pricing forecast: -3% to +5% for organizations without claims or recent incident.

The report also points to several lines of business where pricing has changed direction since the previous report was published in November. For directors and officers liability, many buyers will now face increases of up to 5%. The environmental sector is experiencing its first hard market in over a decade. Buyers could face rate increases as high as 20% for site pollution liability coverage.

"Navigating this dynamic marketplace demands a strategic approach, and buyers facing renewals should focus on creating submissions using distinguishing data and narratives to set themselves apart from their peers," said Peiser, noting that Willis Towers Watson will be working closely with clients and carrier partners to achieve the best possible outcome for insurance buyers.

Key price predictions for remainder of 2018

View tables here: https://www.willistowerswatson.com/en/press/2018/04/commercial-property-rate-hikes-ease-insurance-buyers-still-face-upward-pricing-pressure

The Insurance Marketplace Realities series is published in the fall and updated every spring. A digital version of the report can be accessed on the Willis Towers Watson website, along with a video message from Joe Peiser.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas -- the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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