Commercial insurance rates are expected to decrease across 10 lines in 2016, according to a report published last week by Willis North America, the New York City-based risk advisory, reinsurance broking and human capital and benefits company.

These decreases are expected despite recent consolidation among large insurance carriers.

“As two companies become one, the marketplace offers one less piece with which to solve the puzzle of an insurance program. … But a smaller market with fewer, larger players also opens up the field to new comers that can focus on smaller, specialized niches in areas of potential growth. So consolidation often yields its opposite by thinning the competition and encouraging the emergence of new puzzle pieces,” Matt Keeping, Willis North America’s chief broking officer, said in the report.

Here are the 10 lines that could see rate decreases, according to excerpts from the Willis 2016 Marketplace Realities report:


(Photo: AlexRaths/ThinkStock)


What does the insurance market do when it finds itself in what some call an overcapacitized position? Add more capacity. At least that is what we have seen so far in 2015.

Adding more gas to a burning fire, insurers continue to increase their capacity offerings and new players enter the crowded market. This increase in supply continues to promote a competitive environment, as carriers fight for positions on accounts.

Price predictions: -15% to -12% for catastrophe-exposed risks and -12.5% to -10% for non-catastrophe.


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Casualty is clearly a buyer’s market, though underwriting discipline prevents drastic reductions in rates.

On primary Casualty programs, collateral requirements continue to ease and the majority of Casualty markets are now accepting sureties to satisfy part of their collateral requirements.

Due to the increased market options available for lead umbrellas, [Willis sees] no pressure to increase umbrella attachments. However, for clients with large fleets or other difficult exposures, the umbrella market is more competitive at higher attachment points (e.g., $5M), so [Willis recommends] considering increased primary limits and/or buffer policies. The facultative reinsurance market, which can be very aggressive on certain risks, can be accessed as part of such a strategy.

Price predictions: -5% to flat for primary Casualty and -10% to flat for umbrella and excess.

Satellite launch

(Photo: 3DSculptor/ThinkStock)


Aerospace insurers, despite poor results in many sectors, are under pressure to maintain market share. This dynamic, together with the continuing abundance of capacity despite merger and acquisition activity in the broader insurance market, continues to drive rates and premiums down.

The satellite insurance market (for launch and in-orbit risks) has seen more than a decade of positive results, which has attracted significant market capacity and driven down premium rates each year. There is, however, substantial differentiation between launch risks, with the best performing launch vehicles attracting rates that are roughly a third of those applied to launch vehicles with recent performance issues. For in-orbit risks, one-year policies are at historical lows, with standard GEO satellites now attracting premium rates in the region of 0.5% or less.

Price predictions: -20% to -15% for airlines; -10% to flat for products manufacturers and service providers; -5% to flat for airports and municipalities; -20% to flat for general aviation; and -20% to flat for financial institutions and lessors.

Power plant

(Photo: Tibu/ThinkStock)

Energy (downstream)

The relentless softening of the downstream market continues unimpeded. Only one major loss has been recorded in our database so far this year, although we understand others have occurred in recent weeks.

As 2015 is likely to yield overall underwriting profits for this class, the scramble for premium income and market share will likely intensify. While some observers have forecast a withdrawal of capacity for this class in the past, it seems clear that no carriers are actually withdrawing.

Downstream insurers continue, in general terms, to compete on price and price alone, with little if any movement on offering broader coverage or lower retentions.

Energy (upstream)

In the first half of the year, softening intensified. Even programs written by the most conservative section of the market achieved modest reductions, while programs led by insurers seeking to improve their profile and increase market share enjoyed much more dramatic reductions.

This softening is slowing in the second half of 2015. A series of major losses (most of which will be paid for by insurers out of the 2014 year account) materialized during the first half of 2015. We have seen four losses above $100M already in 2015.

Price predictions: Accelerated softening for the downstream energy market and decelerated softening for the upstream energy market.


(Photo: Dmitrii Kotin/ThinkStock)

Health Care Professional Liability

We expect the Health Care Professional Liability (HPL) market to stay soft through year end and beyond, with flat to low single-digit decreases at typical renewals. Accounts with good loss experience that are not marketed annually may occasionally see low doubledigit reductions.

This line will likely remain one of the most stable and profitable P&C lines into 2016.

HPL is a very competitive line and recent marketplace entrants will further the trend. The competition has helped keep pricing low for health care industry buyers.

Due to the long tail of HPL, health care reform has not yet affected claims. But changes wrought by the Affordable Care Act will shape malpractice risk and underwriter response, as many health care organizations manage ACA implementation and clinically integrate their organizations.

Price prediction: -5% to flat.


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Continued increases in international trade volumes are relieving some of the pressure on insurers to increase premiums.

Insurers will be looking for increases or flat renewals for catastrophe-exposed accounts.

Deductibles remain generally stable.

Continued global political unrest exposes potential gaps in cover for insurrection, terrorism and political violence.

Insurers remain willing to provide extended cover and increased limits in order to retain clients.

Price predictions: -10% to flat across cargo, hull and marine liability categories.

Riot police

(Photo: Chokchaipoomichaiya/ThinkStock)

Political Risk

Due to persistent conflict with the Islamic State and protests against the Iraqi government in response to corruption scandals and power shortages, the Political Risk insurance market remains essentially closed to new Iraqi exposures.

Russia’s military intervention in Syria has sparked fresh debate on President Putin’s support for the Syrian President Bashar al-Assad and his intentions on the international stage. Meanwhile, the economy is troubled by the combined impact of lower oil prices, the additional budgetary burdens caused by the Ukrainian crisis, and tightened Western sanctions. Degrading credit ratings are already affecting smaller banks. Analysts have warned of Russian retaliation against foreign firms. In many private market insurer’s portfolios, Russian exposure is among the largest aggregate exposures, so such retaliation could produce a CAT event in the PRI market. Most markets continue to be off-risk for new Russia deals; however, they are considering some limited lines on a very selective basis.

Violence persists, and the IMF-assisted bailout in [Ukraine] still faces significant uncertainty. Markets are essentially closed to risk in eastern Ukraine and look at risk in western Ukraine on a case-by-case basis, although some markets still will not write any new Ukraine risk.

Price prediction: -5% to flat.

Building construction

(Photo: Srgktk/ThinkStock)


The Surety market remains competitive, as new players continue to compete for market share. A good example of this race for market share is ACE’s acquisition of Chubb. Sureties are aggressively pursuing new business as the construction economy continues its gradual recovery. The competitive environment is pushing sureties to focus on middle market contractors and commercial surety.

Points of contention in contract negotiation surround extended warranties, consequential damages and other onerous conditions that owners are asserting with contractors. Contractor profit margins, meanwhile, remain under pressure, narrowing their margin for error.

Price predictions: Flat for contract and -5% to flat for commercial.

Related: Building projects are up, but where are the workers?

Terrorist suspect

(Photo: Alexander Zemlianichenko/AP Photo)


The re-extension of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), the absence of major Terrorism losses in the West, and abundant capacity in the insurance sector are creating downward pressure on rates, except for buyers seeking to cover risks located in major metropolitan areas.

Despite the absence of a major attack, the threat of terrorist attacks has increased with the demonstrated financial strength and global reach of such terrorist organizations as ISIS, Boko Haram and Al Qaeda. Increasing evidence of lone-wolf style attacks is making prevention harder and targeting more indiscriminate.

The stand-alone Terrorism insurance market offers creative and flexible alternatives to TRIPRA-supported programs and can theoretically provide more than $4.3B per risk.

Price predictions: -15% to -5% percent for non-Tier 1 and -10% to flat for Tier 1.

Foreign trade

(Photo: Huntstock/ThinkStock)

Trade Credit

Soft market conditions linger for Trade Credit insurance rates and retention/deductible levels, but reductions continue to level off. Overall, however, abundant capacity is still available (outside of the retail industry), and we expect a buyer’s market for 2016.

Capacity for Latin America is more scarce due to economic uncertainty in the region.

Receivables Purchase Programs and Securitization wraps are much more active and the trend will continue over the next year. Several banks are increasingly using Trade Credit insurance as a collateral enhancement to become more competitive.

Supplier Credit programs are garnering more attention and we see this trend continuing for the next year.

Price prediction: -5% to flat.

Related: Here’s what to expect in 2015