It’s a Buyers’ Market

Insurance buyers can expect to face friendly market conditions on most lines of insurance for the remainder of 2015 thanks to reduced catastrophe losses and a high supply of capital.

But evolving threats from a range of risks — cyber attacks, political instability and a changing climate — pose risk management challenges for many of these same buyers, says Willis Group Holdings in its 2015 Marketplace Realities Spring Update.

While buyers should enjoy favorable pricing and terms in most lines, there are some exceptions to the downward trend, most notably cyber insurance.

Willis expects commercial property rates to fall by an average of 12.5 percent to 15 percent for both non-catastrophe-exposed and catastrophe-exposed risks, due in part to a market flush with capacity, according to the report, which suggests even further softening could occur. Insurance carrier appetite for this risk remains strong and with increased carrier capacity, Willis says buyers are enjoying ample options in determining where to place their business in 2015.

For commercial casualty lines, capacity also remains abundant. Willis says it expects primary pricing at renewals to be flat. The pricing environment for workers’ compensation is unchanged, with a mix of increases and decreases ranging between -5 percent and +5 percent, though California workers’ compensation rates are expected to climb by 8 percent.

Individual experiences will vary depending on industry, geography and loss history, but overall Willis expects a marketplace that continues to offer opportunities for buyers.

But, Matt Keeping, chief broking officer, Willis North America, said challenges remain for organizations as risk profiles change. “The threat of cyber-related losses seem to be a matter of not if, but when; the push for global markets is clashing with the realities of political upheaval and war in many places on the planet, making political risks increasingly unavoidable; and even if Nat Cat losses are down in the aggregate, there is the sense that a changing climate brings an increased potential for widespread catastrophe in heavily populated areas.”

Cyber insurance is among the exceptions to the broad downward trend. With cyber breaches increasing, the demand for stand-alone cyber policies is dramatically rising. Willis predicts increases of up to 10 percent for most buyers. However, organizations with point-of-sale (POS) exposures face 10 percent to 100+ percent increases for primary premiums.

Willis also expects rate increases on errors and omissions coverage for organizations with poor loss experience or difficult industry sectors, and some environmental insurance programs. In the executive risks lines, buyers will find a mix of modest increases and decreases.