Commercial Insurance Markets Looking Favorable for Buyers in 2014: Marsh

The ample capacity and competition that helped temper firming of U.S. commercial insurance rates in 2013 is expected to continue into 2014, unless catastrophe losses turn out higher than expected, according to a report by insurance broker Marsh.

U.S. commercial property insurance prices stabilized for many organizations in 2013 as a significant surplus of capital among insurers and reinsurers kept competition high, Marsh said in its U.S. Insurance Market Report 2014.

In addition, despite average year-over-year total directors and officers liability (D&O) program rate increases reaching as high as 3.6 percent in 2013, price hikes steadily lost momentum through the fourth quarter and are expected to continue softening in 2014 driven by excess insurer competition. Coverage in all areas of D&O insurance is expanding, according to the report.

The casualty insurance markets also tempered in 2013, as rate increases were generally lower than had been anticipated at the beginning of the year. This shift in the casualty markets is expected to continue in 2014, with rates generally poised to renew flat or with increases in the low single digits for insureds in desirable classes of business with good loss experience, the report notes, the report said.

Employers typically experienced workers’ compensation rate increases in the low single digits in 2013 depending on program type. However, attempts by carriers to push for further rate increases in 2014 will likely be tempered by the ongoing competitive environment and by insureds differentiating their risk profiles, according to Marsh.

However, there are already signs that uncertainty over the future of the federal terrorism insurance program is having an effect on workers’ compensation, the report said.

“Organizations of all sizes and across all industries should generally expect favorable market conditions in 2014 as long as capacity and competition remain plentiful and catastrophe losses remain relatively low,” said Dave Bidmead, Marsh’s US CEO.

“However, now is not the time to become complacent. Emerging and quickly evolving risks requires that risk managers stay abreast of the changing market and ensure they are properly protecting their balance sheets and managing their risks for growth,” he said.

He said that organizations incorporating data and analytics within their risk management and risk transfer strategies will generally achieve the most efficient outcomes.

According to the report, uncertainty about whether Congress will renew the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is being reflected in the marketplace. Many organizations with large employee concentrations in big cities are already experiencing “significant pressure in terms of availability and pricing of workers’ compensation coverage,” the report said.

The cost of property terrorism insurance also could become volatile if TRIPRA is not reauthorized, Marsh warns. TRIPRA is set to expire on Dec. 31, 2014.

At the same time, some specialty lines of coverage, most notably marine liability, continue to firm. Premium increases of between 5 percent and 20 percent for marine insureds with good loss histories are typically expected in 2014. These will be driven by continued fallout from the Deepwater Horizon incident and Superstorm Sandy terminal operator claims.

Marsh also predicts modest rate firming in the employment practices liability insurance (EPLI) market in 2014, especially for small to midsize employers. Average renewal rates were flat to up 10 percent in the fourth quarter of 2013 depending on the size of the organization, the report said.

Also, the report notes that cyber insurance is gaining in popularity among small and midsize companies.