Overcapacity in the international construction and P&C markets in the first half of 2014 resulted in rate reductions of up to 30 percent for commercial insurance buyers.
This is according to Willis’s Q3 2014 Construction, Property & Casualty Market Review, which found that this overcapacity is primarily driven by benign loss activity and softening conditions in the global reinsurance market, which is having a trickledown effect to the primary insurance market.
Over and above rate reductions and corporate insurance buyers are also benefitting from an increase in available natural catastrophe capacity.
With no withdrawals of capacity from the construction market in the last six months, capacity is at an all-time high, according to the report. At the same time the volume of construction projects in many parts of the world has reduced, intensifying competition between carriers for premium volume and market share in the construction insurance market.
Meanwhile, the international property & casualty insurance market continues to witness an influx of capital, according to the report. Provided that detailed risk information is available, carriers are prepared to offer insurance buyers improved coverage and particularly improved contingent business interruption extensions, noted the report.
In the general property market, the report found that premium rates are continuing to decrease by between 10 percent and 15 percent on claims free business. Even larger reductions are available for buyers who can clearly demonstrate robust risk management practices and detailed risk information, claimed the report.
Commenting on the report's findings, James Nicholson, head of broking and industry practice groups for construction, property and casualty at Willis, says: "Our view is that soft market conditions are likely to continue without necessarily threatening the profitability and solvency of carriers, provided that they actively manage their portfolios. For their part, corporate insurance buyers can achieve substantially better than average pricing through the provision of good underwriting data, the use of analytics to drive pricing and through strong relationships with carriers. The outlook therefore remains very favourable for corporate buyers and more particularly for the well-informed."
You can view the full report here.
Willis, report, P&C, construction, premium rates, overcapacity, James Nicholson