London insurance market to see falling rates at Jan. 1 renewalsReprints
Rates will fall for most classes of business underwritten in the London insurance market, and by as much as 10% for some classes, at the Jan. 1 renewal, according to a survey of underwriters by PricewaterhouseCoopers L.L.P. released Wednesday.
Property reinsurance and energy lines may see rate reductions of double-digits, according to PwC.
The accountancy firm said that during 2015, property reinsurance and energy lines saw double-digit risk-adjusted rate reductions, on average, and reductions of between 7% and 9% are likely on these lines at Jan. 1.
“PwC has observed a tendency within the market over recent years to underestimate rate changes in the current soft market,” it said in a statement.
“If this continues, we may see another year of double digit risk-adjusted rate reductions across property and energy lines,” it added.
Rate decreases have been particularly notable in energy classes, PwC said, with risk-adjusted rate reductions of 15% on average for both onshore and offshore risks during 2015, “despite a number of large losses in the offshore sector during the year.”
In property reinsurance, rates are still falling, PwC noted.
“There has also been pressure on terms and conditions relating, for example, to the hours clause and reinstatements in addition to further rate reductions,” it said.
“The pressure on rates in property reinsurance and energy classes is forcing some reinsurers to redeploy capital towards casualty reinsurance, despite anticipated average risk-adjusted rate reductions in this sector of 7% in 2016,” PwC said.
“It is clear we are in the depths of a soft cycle where an average year will see a loss for many, the pace of rate softening increasing, broker facilities commonplace, and questions raised on casualty reserves,” said Jerome Kirk, London market actuarial leader for PwC, in a statement.
According to PwC, London market insurers are, on average, assuming a 98% new combined ratio for the 2016 underwriting year.
PwC surveyed and analyzed more than 30 London market particpants.