U.S. commercial property insurance rates declining: Willis report
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U.S. commercial insurance buyers should see declining rates for property coverages in 2014, Willis Group Holdings P.L.C. said in a report released Tuesday.
The 2014 Marketplace Realities Report finds that a variety of factors, including new competition and falling reinsurance prices, will force property insurers to lower rates in the coming year.
Willis said it expects property rates to fall an average of 10% to 12% for non-catastrophe-exposed risks, while risks exposed to natural catastrophes such as hurricanes will likely decrease in the 5% to 10% range.
The brokerage said favorable loss history, the decreasing cost of reinsurance and new capacity entering the market from “sources as widespread as China and Omaha” were the primary factors affecting rates.
“Most shared and layered accounts were oversubscribed in 2013 due to the oversupply of capacity in the market,” the report said. “This trend will continue in 2104 due to the capital commitments from a leading U.S. carrier, Chinese insurers, broker facilities, and capital markets infiltrating the traditional property market more than in years past, a trend that is expected to continue to exert downward pressure on rates.”
However, the report notes that these factors are unique to property lines, and that rates for other lines of business including casualty, workers compensation and employee benefits coverages will be flat or see increases.
For example, the report predicts the cost of workers compensation policies will rise between 2.5% and 10%, with policies in California rising up to 20%.
“Industry combined ratios have improved recently, and this may cause a tempering of rate increases, particularly in states that have enacted workers compensation reforms,” the report said. “California, however, continues to be an exception.”
