US insurance rates under pressure
Insured losses from 2013 were half that suffered in 2012, with limited cat losses set to place additional pressure on what is likely to be a tough renewal.
Insurers have faced steady, if unspectacular rate declines in the US during 2013, according to a report published by Marsh, in the face of a benign catastrophe season and industry overcapitalisation.
For accounts with over $5 billion in total insured value, insurance rates declined by 1.1 percent during the first nine months of 2013, while for smaller accounts between $1-5 billion declines have been around 0.1 percent. The report says that losses from Sandy have been largely forgotten in the US, with limited US and international catastrophe losses likely to be playing their part.
International insured losses amounted to $44 billion during the year, down from $81 billion in 2013, according to data from Swiss Re. While thunderstorms, hail and tornadoes caused $7.4 billion of insured loss in the US throughout the period, there were no major wind events to speak of.
Flood was the most significant component of international cat losses in 2013, with losses in Central Europe and Canada accounting for $4.1 and $1.9 billion of insured losses during the year. Severe weather was also a significant component of catastrophe loss in Europe, accounting for $2.7 billion and $1.4 billion of insured losses in two separate catastrophe events during the year.
Despite the economic losses associated with Typhoon Haiyan in the Philippines, insured losses will be modest from the event, but they do raise the spectre of events similar to the Thai floods, which had a significant business interruption component.
Marsh’s report on the US property insurance market indicated that “the surplus of capital among insurers and reinsurers continued to fuel overall softening in the US property insurance market through the third quarter of 2013”.
“The current supply of capital dedicated to the global property insurance market continues to temper rate increases, even on those accounts with losses,” said Duncan Ellis, Marsh’s US Property Practice Leader. “It’s a different property market than it was a year ago when Superstorm Sandy made landfall in the Northeast causing underwriters to tighten terms and conditions, restrict capacity, and raise prices.”
While the report said that Sandy had caused a rethink in 2012, its effect on rates in 2013 has been more limited. Marsh did state that Sandy had however “been a major impetus behind greater scrutiny of flood exposure and the remapping of many flood zones by the Federal Emergency Management Agency”
“New capacity and competition will continue to create favorable strategic and tactical property insurance buying opportunities in 2014,” Ellis concluded.
