Posted on 13 Apr 2012
Insurers have increased prices and reduced capacity in response to major property-catastrophe losses and concerns about risk following the introduction of the new hurricane model in 2011, according to a new State of the Market report by NAPCO LLC, a wholesale broker specializing in catastrophe property coverage.
The report, which examines performance, reinsurance and pricing trends, notes that the diminishing benefit of loss reserves in the coming months may become another factor to support a hardening market. Recommendations are offered for insurance buyers and retail brokers to position themselves to obtain favorable terms and price.
The bi-annual report combines insights from top brokers with an analysis of recent catastrophe property market statistics. The full report can be found at: http://www.napcollc.com/articles/NAPCOInsuranceInsights-TheStateOfTheMarket-2012-April.pdf
“With the price of property-catastrophe insurance already at very low levels after years of competition, the market reached a turning point last year,” said David Pagoumian, CEO of NAPCO LLC. “The catastrophe losses and the heightened concerns about risk exposures – along with higher reinsurance costs – have been catalysts leading insurers to raise prices, reduce capacity and tighten underwriting criteria.”
The report looks at several key performance trends:
• The insurance industry’s underwriting performance in 2011 was the worst since 2002 as global catastrophe losses soared to record levels. Even so, policyholder surplus showed only a minor deterioration.
• Global catastrophe losses totaled at least $105 billion in 2011, exceeding the 2005 record of $101 billion. Early spring tornadoes have caused an estimated $1 billion to $2 billion in insured losses in the first quarter of 2012.
• Hurricane season is expected to be below average; however, tornado storm season is already running nearly 30% higher than the average of recent years.
• Reinsurers raised rates in response to the heavy catastrophe losses suffered and the impact of the updated RMS hurricane model.
• The price of property-catastrophe insurance moved higher in the first months of 2012, the report states, with various price range increases, depending on the class of business, geographic spread and loss history.
Additional details for each of these trends is available at http://www.napcollc.com/articles/NAPCOInsuranceInsights-TheStateOfTheMarket-2012-April.pdf
According to the report, to secure capacity at the most favorable terms in the current market insurance buyers need to be proactive. It’s essential to understand the importance of catastrophe models on the renewal process, gather critical information for underwriters, start the renewal process early and be prepared for higher prices.
NAPCO (www.napcollc.com) is a leading wholesale broker of commercial property insurance coverage. The company provides retail agents and brokers with an efficient, single-source independent marketing arm for difficult placements that have significant exposure. NAPCO utilizes in-depth research and sophisticated risk modeling to implement coverage and cost- effective programs for its clients. Headquartered in Iselin, N.J., NAPCO provides access to the global insurance market, including major and specialty domestic carriers, excess and surplus lines markets, reinsurers and international providers of capacity.