Despite a number of terrorism incidents around the world, and the worst year on record for natural disasters, international property rates continue their slide, except in the United States, according to a report from insurance broker Aon.
The firm's first Global Market Property Tracker report, out of its London office, found that the average rate for international property risks witnessed a reduction between 14- and 17 percent over the course of 2005.
Aon said U.S. non-marine property rates moved from an average midyear decrease of 10 percent to an average increase of 37 percent by the year end in the wake of Hurricanes Katrina, Rita and Wilma.
According to Aon, non-marine property premiums are likely to continue their downward trend this year and the bottom of the cycle may not be felt until the end of 2007.
For U.S.-based risks, Aon said rates are currently increasing between 20- and 40 percent for those clients with catastrophe exposures. For clients with no catastrophe exposures rates are generally stable.
"A clear divide is opening up between U.S. and international risks, and this is likely to be a main feature of the global property market in the coming year," observed Oliver Schofield, director of Aon's Global Property Practice Group.
However, he warned investors who entered the market hoping to take advantage of anticipated rate increases following last year's hurricanes will probably be unsuccessful.
"With an active hurricane season forecast for 2006, investors hoping to make a quick return on North American business are likely to be unlucky. They will need to build a more diverse global portfolio of business if they want to avoid significant losses when the hurricane season starts," Mr. Schofield cautioned.
Using analysis from Aon's experts around the world, the Global Property Tracker highlighted the following trends in specific regions:
o Asia–customer loyalty to their insurer partners remains strong.
o Europe–buyers are price sensitive and rates are expected to continue falling during 2006, albeit at different degrees from country to country.
o London market–despite being hit hard by last year's hurricanes, underwriters continue to offer aggressive rates for risks managed well outside the United States.
o Bermuda–underwriters will need to soften their current rating stance toward non-U.S. clients if they want to maintain global diversity in their portfolios of business.
o United States–underwriters are increasing rates across the board and limiting catastrophe cover.
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