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Marsh: Companies with Difficult Risk Profiles Seeing Double-Digit Excess Casualty Rate Hikes

Posted on 17 Oct 2012 by Neilson

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MarshExcess casualty insurance rates continued to rise in the third quarter of 2012, as insurers sought higher prices amid increasing claims and litigation trends, and a low interest rate environment, Marsh said in a report published today.

Renewal rates rose on average by 3% in the third quarter, marking the fifth straight quarter of price increases, according to Marsh’s latest Marsh Risk Management Research Briefing, Benchmarking Trends: Excess/Umbrella Insurance Rates Still Increasing. Companies with recent significant losses typically saw the highest increases in pricing and primary attachment points, often times in conjunction with coverage restrictions. Overall, 46% of Marsh’s clients received a rate increase in the third quarter, 39% saw no change, and 15% saw rates decline. This mirrors what clients experienced in the first two quarters of 2012.

“Given the continued increase in claim trends along with deteriorating combined ratios, underwriters are seeking to raise rates on umbrella and excess insurance across all industries,” said Tony Tam, Marsh’s US Excess Casualty leader. “However, robust competition and ample capacity in the market is tempering much of those efforts.”

For the remainder of 2012, excess/umbrella insurers likely will continue to seek mid- to high-single digit rate increases, on average, for expiring program structures Marsh said. Companies with difficult risk profiles are likely to experience increases of 10% or greater.

“For organizations renewing their casualty insurance programs in this environment, regular communication with underwriters and exploration of alternative structures is key,” Mr. Tam said. “Those insureds that start the renewal process early and differentiate themselves to underwriters—with particular focus on core and non-core exposures—will be best positioned to secure favorable terms at renewal.”