The impact of Superstorm Sandy on Northeast commercial-property rates has waned, and the U.S. property market has continued to soften through the first nine months of 2013, according to a recent Marsh briefing.
"The surplus of capital among insurers and reinsurers continued to fuel overall softening in the property insurance market through the third quarter of 2013," Marsh says in "Benchmarking Trends: Capital Surplus Affecting Property Insurance Pricing."
The broker notes that average rates for large companies showed a slight increase in the third quarter, but overall have declined in 2013.
Marsh says the market in the Northeast had been "heavily influenced" by Sandy in the first half of the year, but the broker states that the effects have faded as the year has progressed. "Most insureds that experienced significant losses from Sandy have now renewed, typically at significantly harder terms and with restricted capacity and pricing," says Marsh.
"Also of note," says Marsh, "early in the third quarter, one large buyer in the Northeast found it difficult to procure sufficient cat capacity in the retail property-insurance market. It turned instead to the sale of a catastrophe bond into the financial markets."
Marsh says this transaction by a single retail insurance buyer, rather than an insurer or reinsurer, "is a significant step in the evolution of financial products as an alternative to standard retail insurance," though the broker stresses that one bond does not necessarily signal a trend.
Elsewhere in the U.S., the market generally has been softening, with insurers largely shrugging off this year's catastrophes around the globe.
Marsh says the most significant 2013 rate change was seen in the second quarter for companies with total insured value (TIV) of $5 billion or more. The broker says 25% of those clients saw decreases of 13.6% or greater, compared to an average rate change in that quarter of down 3.8%.
Larger companies in general have secured greater rate decreases throughout the year, says Marsh, though most insureds experienced decreases due to competition.
While insurers have been competing on price, though, they have not broadened terms and conditions or lowered deductibles considerably, says Marsh.
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