Verdict Out On How Soft The Market Will Be: Willis

Verdict Out On How Soft The Market Will Be: Willis

NU Online News Service, Jan. 18, 2:01 p.m. EST?Insurance prices in various market sectors continue to drop, a report from a leading brokerage said.[@@]

Willis Group released its International Liability Market Review Winter 2004-2005 update, saying that after emerging from an intense hard market in the beginning of 2004, there are still "significant variations in timing and amplitude of the cycle dependent on class of risk and geography."

The six-page update is available online at www.willis.com/Extras/Publications.aspx. After assessing the worldwide market, it concludes that overall, clients in 2005 should see more flexibility in the way insurance programs are structured and developed.

Whether the market has cooled off or is beginning to "return to uncontrolled price competition" will become more apparent as the industry emerges from the current treaty renewal season, the report said.

Concerning specific risks and regions, Willis, headquartered in London, said that in the U.S. the losses from the recent hurricane season, and the typhoons in Japan, are not having "significant impact on liability market sentiment."

Among industry sectors, the report notes that energy, tire and railway sectors remain firm while the pharmaceutical industry is facing "significant problems."

There still remain concerns over profitability and adequacy of reserves, but insurers are striving to hold onto underwriting discipline, Willis said.

A key question the report asks is whether insurers' senior management will set budgets for 2005 that will accelerate price pressure. While not answering the question, it speculates that "there is much talk from senior members of the industry of managing the [softening] cycle."

The report notes that many reinsurance treaties are being renewed and that "on current evidence pricing is soft with rate reductions not uncommon."