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Mixed commercial insurance rate forecast for 2013: Willis

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A new forecast of 2013 commercial insurance rates projects a mixed bag of rising and falling rates, with rates declining for non-catastrophe-exposed property programs and increasing modestly for casualty, executive risks and some specialty lines.

Released on Wednesday, the “2013 Marketplace Realities” report from Willis Group Holdings P.L.C. projects rates for non-catastrophe-exposed property programs falling from 5% to 10% next year, with rates for catastrophe-exposed property remaining flat. On the property front, “The formula for 2013 is simple: Abundant capacity plus low underwriting losses plus a weak economy equals a flat market,” the report said.

Among casualty lines, the Willis report projects 3% to 7.5% increases in general liability rates, flat pricing to 7.5% increases for umbrella coverage and 2% to 15% for excess casualty coverage. Workers comp rates are projected to increase 2.5% to 7.5% with increases of up to 20% in California while auto coverage is expected to increase 2% to 5%.

The report said that despite rate increases, underwriters continue to be competitive in quoting casualty business while firming rates and stricter underwriting are prompting some degree of competitive remarketing in approximately 90% of programs up for renewal.

In executive risk programs, Willis foresees directors and officers liability rates ranging from flat to 10% increases in 2013, while errors and omissions rates will increase 5% for programs with good loss experience and those with poor loss experience will see E&O rates increase 10% to 25%. Employment practices liability rates are expected to range from flat to 10% increases, while fiduciary coverage rates will range from flat to 15% increases.

Willis forecasts cyber risk rates ranging from flat to declining 3% at renewals, with more competitive rates for first-time buyers.

In the employee benefits area, health care reform is a major factor influencing the landscape, and Willis expects rates to increase 8% to 10% in 2013 as insurers pass the costs of compliance along to buyers and health care providers seek improved payment terms from insurers.

The 2013 Willis marketplace forecast is available here.