Brokers attending an insurance industry meeting today were divided over how bad conditions are in the current downward pricing swing.
Their opinions were aired as insurance broker Willis Group Holdings sponsored one of its continuing series of forums. This session focused on the mid-year insurance marketplace, with a review and forecast on five market segments: property, casualty, employee benefits, directors & officers, and environmental lines.
Suzanne Douglass, property practice group leader for Willis, voiced a very pessimistic assessment.
"With the exception of those accounts that suffered significant storm losses last year, we continue to see signs of the cyclicality [this market] is forever doomed to," she said.
Despite last year's decreases and poor investment income environment, she said property continues to see a downward trend of between 10 and 15 percent.
To avoid losing business, she said, insurers are offering steeper declines to keep accounts and avoid a competitive "blood bath."
This year will see the third consecutive year in rate reduction, she said, with some customers experiencing the same soft market premiums they had in the late 1990′s.
Clients are also in a good position to regain some of the terms and conditions they lost early in the hard market, but questions about the Terrorism Risk Insurance Act (TRIA) "cast a pall" over property insurance, explained Ms. Douglass.
Capacity for high risk accounts after the Dec. 31 TRIA sunset date is dwindling as questions over the renewal of the program remain, Ms. Douglass said.
Jonathan Zaffino, executive vice president, Willis risk solutions, said capacity remains consistent and abundant with ongoing rate reductions, which he said were "not dramatic or across the board."
Companies are protecting their renewals but looking hard at losses. Decreases are coming in as high as 10 percent to flat, depending on the line and risk. Competition, too, depends on the risk and line of business.
In the area of directors & officers insurance, Brenda Shelly, executive vice president and Western region leader of Willis, executive risk, said that despite very active claims activity over the past year, there is strong capacity in the market globally and rates remain competitive. "We anticipate rate stability on the horizon, but terms and conditions driving the coverage are still on the increase," she noted.
For environmental insurance, John Reynolds, environmental practice group leader, said the market continues to see healthy growth as more and more companies seek to protect themselves in this area. He said the market is evolving, but terms and conditions remain stable.
Health care remains a dominating concern for employers, said John Fortin, national practice leader, health care cost management and analytics, Willis employee benefits. They are looking for ways to control costs, including wellness programs that counsel employees on how to take care of themselves.
A replay of the presentation can be found at www.willis.com/Extras/webcasts.aspx. or by calling (866) 373-4987 (in the U.S.) or (203) 369-0267 (International).
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