Insurance broker Lockton states that underwriting capacity remains plentiful across most lines of commercial insurance. There are no significant insurance coverage restrictions, despite major losses associated with the Deepwater Horizon spill and the Chilean earthquake.
In the insurance broker’s recently published Market Update Fall 2010, Lockton says that insurance market consensus is that the current pricing situation is unsustainable in the long-term, but hardening of insurance prices will only be seen when insurers and reinsurers start to significantly eat into capital reserves.
The insurance broker’s Market Update includes snapshots of more than two dozen commercial insurance markets with the latest trends facing risk managers, chief financial officers and other executives.
Commercial insurance market highlights from Lockton include:
• Global casualty – Tony Hardy, Managing Director of Global Casualty in the insurance broker’s London office comments: “There is scant sign yet of firming pricing in the casualty market. But, with interest rates remaining resolutely low, there is some suggestion that insurers may be leaning a little heavily on releases of past-year reserves to shore up their results. How sustainable this approach will prove in the longer-term is very much open to question.”
• International property – Simon Scholfield, Regional Managing Director, Risk Solutions observes: “The London market has been carefully managing its aggregates in recent years to ensure that any one event does not overexpose an individual company or syndicate. However, recent events such as the earthquake in Chile and European windstorms have reminded us of the power of nature to undermine the best-laid plans of individuals and corporations.”
• Financial Risks – Dennis Love, Vice President, Lockton Financial Services in the insurance broker’s Washington, D.C. office, observes: “Commercial insurance market capacity remains abundant, leaving D&O insurance buyers with many options. In addition, brand name insurers that suffered ratings downgrades during the credit crisis of 2008 and 2009 have now stabilized, so predictions of a ‘flight to quality’ have not materialized to any great degree.”
• Energy – David Way, Executive Director for the insurance broker in London comments: “Across most areas of the energy insurance market, capacity was at record levels in early 2010, and rates have been highly competitive. The obvious change is the offshore market, where the Deepwater Horizon explosion and subsequent oil spill has prompted insurers to adopt a much more cautious approach to similar risks.” Adds John Rathmell, President of Lockton Marine & Energy in Houston: “As the energy sector prepares for the reinsurance renewals and the next big renewal season between February and July, the BP disaster will have an effect on the renewals. Those accounts that renewed before the BP disaster could expect to see some rate increases this year. In the immediate aftermath of the Macondo blowout, rates increased about 15 percent to 25 percent. By the time those early accounts renew in 2011, rate increases may moderate somewhat but are still likely to be up compared to last year.”
The Market Update also provides analysis of other markets including: Cyber Liability, Real Estate and Construction, Reinsurance, Risk Services and Solicitors’ Professional Indemnity. To obtain free copies of these reports please visit www.locktonmarketupdate.com.