"It would certainly be premature to discern any clear sign of a hardening market, but 2011 could yet end up looking like a year of transition for the casualty market," says Tony Hardy, leader of Lockton's Global Casualty team in London, in the report. "Buyers would be well-advised to engage with their markets early in the renewal process to avoid any unpleasant surprises on rates or retentions, particularly if their claims experience has deteriorated over the past few years."
The Lockton Market Update notes that many carriers released excess reserves in 2009 and 2010 that improved their current year net income and combined ratios. For several carriers, the reserve releases accounted for 10-20 percent of the carrier earnings and up to 4 points of the overall combined ratio.
"In conversations with several carriers and other sources, the industry has lost its reserving buffer, and further releases are not expected to be significant, if they occur at all," says Mark Moreland, Director of Risk Management for Lockton in Kansas City in his commentary on the casualty insurance market.
"Recognizing deteriorating combined ratios without the support of further reserve releases, several carriers are considering reducing their market share and attempting to achieve small, single-digit rate increases at renewal. This may force companies to market their deal to other overcapitalized carriers eager to generate new business."