Buyer-friendly property market continuesReprints
It's a great time to buy commercial property insurance.
Rates are down by double digits compared with a year ago. Capacity isn't a problem. Terms and conditions are generally generous.
And the market shows no sign of changing soon, according to underwriters and brokers alike.
“It's a pretty competitive market. There continues to be downward trend,” said Peter Pettinicchio, vice president of operations client service at Johnston, Rhode Island-based FM Global.
Rates were down as much as 15% before the Risk & Insurance Management Society Inc.'s annual meeting in April, said Dave Finnis, national property practice leader at Willis North America Inc. in Atlanta.
During the current midyear renewals, he said some accounts are seeing decreases of as much as 20%.
“If you have a large account with a really good loss record and you are desired by the market, you could create a feeding frenzy,” Mr. Finnis said.
“Rates are down a little under 10%, but we've got 30% of our clients seeing a greater than 10% decrease,” said Rick Miller, national property practice leader at Aon Risk Solutions in Boston. “There's just a lot of capacity,” but underwriters are still making money for the most part, he said.
Nontraditional sources of capital, including hedge funds, have entered the property reinsurance market, thus adding to capacity.
“I think it's a softening market all around,” said Duncan Ellis, national property practice leader at Marsh L.L.C. in New York.
He said some accounts are seeing 20% rate declines, with sectors such as office exposures, real estate, financial institutions and hospitality among the most competitive.
“That's coming off last year, which was also a very good year for buyers,” Mr. Ellis said.
Signs of a buyer-friendly market were evident even earlier in the year.
“We were able to get what we wanted” in February, said Gordon Adams, chief risk officer at tuna supplier Tri Marine Management Co. L.L.C. in Belleview, Washington.
“No complaints whatsoever. It was a very bland renewal,” Scott Clark, risk and benefits officer at Miami-Dade County Public Schools in Miami, said of the school district's property program that renewed in May at an 8% premium reduction.
“We were able to retain our favorable terms, conditions and rates” for the property program that renewed June 1, said John R. Phelps, director of business risk solutions at health insurer Blue Cross and Blue Shield of Florida in Jacksonville. “The incumbent carrier continues to be extremely competitive, and this supports our company strategy of long-term relationships with our carriers.”
Rate reductions aren't as dramatic in the market targeted by Hanover Insurance Group Inc., said Scott Grieco, president of middle market for the Worcester, Massachusetts-based insurer.
Hanover is a total account underwriter, with customers buying property and liability coverage together, and the typical target account generating $50,000 to $500,000 in premium. He said rates for the types of accounts Hanover writes are “definitely” down from last year, but still not negative.
An unusual influx of capital is driving capacity, noted Alexandra Glickman, area vice chairman of Arthur J. Gallagher Risk Management Services Inc. in Glendale, California.
“It's great for the clients, and we anticipate — barring truly catastrophic events over the next months — the double-digit rate decreases will continue,” she said.
The wash of capacity also is affecting the excess/surplus marketplace.
“Everybody has come to play from a capacity and pricing standpoint, and the E&S markets are feeling the pressure from the admitted markets,” Ms. Glickman said.
But not all industries are seeing reduced rates.
Meat processing facilities have raised concern because of the severity and volatility, rather than the frequency, of claims, said Mike Martin, executive vice president and general manager of national insurance property at Liberty Mutual Insurance Co. in Boston.
Attention also is being paid to emerging exposures, notably solar panels, he said.