Tougher U.S. Commercial Market Conditions in 2012: Marsh

U.S. commercial insurance rates are expected to climb across many lines of business in 2012, continuing a trend that began in the second half of 2011, according to a report by insurance broker Marsh.

Substantial catastrophe losses and reduced investment returns prompted many U.S. insurers to seek rate increases in 2011, most notably in the property market, Marsh said in its report, “Navigating the Risk and Insurance Landscape: U.S. Insurance Market Report 2012.”

Property insurance rate increases are expected to accelerate in 2012, especially for insureds with significant catastrophe exposures or loss histories, the report said.

Marsh said there are also signs of rates firming in the primary and excess casualty insurance market. This is especially true for lead umbrella coverage, where insurers have been seeking mid- to high-single-digit rate increases across a range of industry groups due to unprecedented losses.

Financial and professional rates, including for directors and officers (D&O) liability, are expected to firm modestly in 2012, although rate decreases are still achievable.

Key findings in the Marsh report include:

• Insureds with large catastrophe exposures and those with significant losses in 2011 typically saw rate increases of 10 percent or more during the fourth quarter. Those conditions are expected to persist in 2012.
• Primary casualty insurance pricing decreases moderated in 2011, with general liability rates ranging between 5 percent increases and 5 percent decreases in the fourth quarter; insureds can expect to be flat to up 5 percent in 2012, depending on exposure.
• For excess casualty, lead umbrella rates generally were flat to up 10 percent in the fourth quarter of 2011 and excess layers typically were flat to up 5 percent. Market capacity is expected to shrink in 2012 for certain risks.
• Workers’ compensation rates tended to be flat to up 5 percent in the fourth quarter of 2011. Continued firming of the market is expected in 2012, driven by higher underlying claims and medical cost inflation.
• D&O liability rates were generally flat to down 5 percent for most companies in the fourth quarter of 2011. Larger companies were able to secure rate decreases of as much as 10 percent. However, the market is expected to firm modestly in 2012 as a lack of profitability may pressure insurers to seek flat renewals or small increases.

Topics USA Commercial Lines Business Insurance