A study performed by the global insurance broker,
Willis Group Holdings, has reported that there have continued to be gradual increases to property and casualty insurance rates as a result of the many catastrophes that have already occurred this year.
The broker’s 2012 Marketplace Realities report spring update was just released and it will provide guidance for thousands of consumers who are looking to buy or renew their coverage in North America. It will also be an important focus in Philadelphia for the Risk & Insurance Management Society’s Annual Conference and Exhibition, which will run from April 15 through April 19.
Last year, the property insurance marketplace faced significant challenges, particularly because of the $108 billion in insured losses from catastrophes around the world. The recent RMS 11.0 catastrophe modeling tool revisions have also contributed to the pressure that is leading rates to increase. Policyholders with catastrophe exposure saw their rates rise by an average of 5 percent to 10 percent in the final quarter of last year. That said, many saw their rates climb by a much higher 10 percent to 15 percent. This trend continued in to the first quarter of this year.
Though Willis has predicted that the catastrophe risk rates should continue their increases throughout this year, ample capacity and the ongoing economic struggles have held back the pressures to increase more broadly.
Among policyholders of primary and umbrella casualty lines, over three quarters are seeing small increases to the rates that they pay on renewal. These were driven by small revenue hikes and rating exposures.
Within the Willis report’s introductory comments, the Chairman and CEO of the broker, Joe Plumeri, recommended that insurance consumers pay attention to the complexity of the current rate environment, and back up in order to observe a wider perspective, while taking the change in the risk transfer cost from the last five years into consideration.
Within his statement, he wrote the following “We asked our Marketplace Realities authors, specialists in their product areas, this question: If, in 2007, a risk cost $100 to insure, what would it cost to insure that same risk today?” His answer was $70, and that this would imply a 30 percent reduction of premium income, and that the industry has essentially absorbed this drop in property and casualty insurance rates quite successfully. He explained that “What insurers offer, what they are selling, in the end, is their own resilience.”