Business insurance outlook relatively stable for 2014: Study
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This year should present a “stable to somewhat competitive environment for business insurance,” according to a study released Thursday by Wells Fargo Insurance Services USA Inc.
In fact, the insurance market for commercial businesses and public institutions looks relatively stable for each line of business, with only a few lines of business expected to experience rate increases or decreases of 10% or more, according to Wells Fargo's “2014 Insurance Market Outlook.”
The analysis pointed out that insurers enjoyed a profitable year in 2013, with the industry combined ratio improving to 95.8% during the first nine months of the year from 100.7% during the same period a year earlier. In addition, industrywide return on average surplus rose through the first nine months to 9.5% from 6.5% during the same period in 2012. Net written premium “grew modestly, as did investment returns, and policyholders surplus has reached an all-time high,” according to the analysis.
But it also noted that although 2013 showed marked improvement over 2012, “overall insurer rate of return still remains lower than it has been historically,” so insurers continue to feel pressure to increase their rate of return.
The report pointed out that market capacity is at an all-time high for most major lines of business. In addition, the analysis noted that the insurance-linked securities market for catastrophe perils has grown by 16% annually over the last three years, “as hedge funds and other capital market investors find these vehicles increasingly attractive as an uncorrelated area of risk with generally superior returns.”
If that rate of growth continues, alternative capacity could reach a global market share of approximately 25% by 2020, Wells Fargo predicted.
