ProgramBusiness
 
  


Loading LiveCycle Banners.
  1. News Articles
  2. Related News Articles
  3. Comments
News Article Details

Marsh: Only Loss-Affected Exposures Showed Rate Increases

Source: Marsh

Back | A- | A+
 Email This     Print     Subscribe


Posted on 27 Apr 2011

Marsh published research today showing that despite record level first-quarter catastrophe losses, insurance rate increases were confined to loss-affected exposures.

According to Marsh’s Spring 2011 Insurance Market UpdateIn regions and for classes of business not affected by recent losses, there was little change in market conditions in the first quarter of 2011 as overall insurance capacity remains plentiful, especially for new business. In addition, property rate reductions may still be generally achievable, though more difficult to obtain. Organizations with catastrophe exposures, especially those situated in regions affected by recent events, however, will likely see increased rates at renewal.

Despite no immediate turn in the market, many insurers’ and reinsurers’ 2011 budgets for catastrophe losses have already been substantially eroded, if not exceeded, due to first-quarter losses, which include those from the Australian floods, the February 22 earthquake near Christchurch, New Zealand, and the devastating March 11 earthquake, tsunami, and nuclear disaster in Japan. Additional catastrophe losses could impact reinsurance pricing, the report notes.

“The global insurance market faces substantial pressure, especially with the upcoming 2011 U.S. Atlantic hurricane season predicted to be more active than usual,” said Nicholas Bacon, Chief Executive Officer of Bowring Marsh. “Any future catastrophe losses this year are more likely to directly impair the capital positions of reinsurers than impact earnings, which could drive rates higher. Additionally, the introduction earlier this year of the 11th revision of Risk Management Solutions’ hurricane model, widely used for U.S. hurricane and storm surge risk, also will add to upward property catastrophe pricing pressure.”

Marsh’s report also found that as a result of the first-quarter losses, insurers are re-emphasizing their requirements for comprehensive underwriting data that can be modeled to generate reliable forecasts. For example, insurers are looking for insureds to thoroughly substantiate their contingent business interruption (CBI) exposures. Many insurers also are pushing for reduced sub-limits and increased deductibles for both CBI cover and catastrophe exposures.

“More than ever, the prime determinants of potential capacity and the ultimate cost of risk transfer will be each organization’s unique risk attributes, in addition to the structure and quality of its marketplace submission,” said Duncan Ellis, U.S. Property Practice Leader, Marsh. “Organizations that achieve the best results are the ones most able to demonstrate their ongoing commitment to proactive risk management.”

Following substantial disruption to global supply chains as a result of the earthquake, tsunami and nuclear disaster in Japan, the report notes that many organizations are reassessing their vulnerability to such events and the efficacy of their risk management programs.

“The events in Japan exposed significant gaps in business resiliency at a number of firms,” Mr. Ellis said. “This further highlights the need for organizations to take a 360-degree view of their end-to-end supply chain identifying demand, supplier, and operational risks as well as the financial impact of failures.

“Organizations seeking to deliver their products and services to market better, faster and cheaper, yet take a blind eye to the increased volatility and potential impacts of a disruptive event such advances can have, are putting their organizations’ balance sheets at risk,” he said.


Comments

Post a Comment
If you are a Storefront / Tradingfloor user, click here to login.
Note: As a guest user, please fill out the form below to post a comment.
Post your comments here.
Name :
Email Address :
Captcha :
Comments :
Character left : 2000