Property insurance market seeks price increases, but abundant capital mutes widespread market firming

ARLINGTON, Va., Feb. 14, 2018 -- Commercial property insurers are seeking double-digit rate hikes on catastrophe-exposed insurance programs following 2017’s record natural catastrophe-related losses; however, abundant risk transfer capacity in the form of traditional and alternative capital is dampening the potential for widespread market firming, according to global advisory, broking and solutions company Willis Towers Watson (NASDAQ:WLTW) in its Property Market Update. The report, published today, details market conditions for North American insurance buyers.

Organizations with catastrophe-exposed properties that have suffered losses are facing the steepest rate hikes, between 20% and 25%, while catastrophe-exposed programs without losses are likely to see price increases of 10% to 20%. Meanwhile non-catastrophe-exposed programs can expect renewal pricing to be flat to +5%.

According to the report, 2017’s global natural catastrophes have resulted in estimated insured losses of $143 billion thus far, topping the previous record of $120 billion in 2011. However, the report points to strong reinsurance market industry capitalization and the continued appetite by alternative capital providers as critical factors in helping the industry absorb recent losses without major balance sheet impairment. This scenario is also “dampening the ability of underwriters to attain significant rate uplift and will diminish the likelihood of a sustained marketplace firming,” the report said.

While market reaction is not producing rate increases as steep as initially feared, buyers still face challenges, the report noted. For example, property rate increases are expected to vary significantly from the mean, and pricing will depend on an organization’s specific exposure, loss history and occupancy. For organizations approaching insurance program renewals, “aggressive marketing” of their insurance programs may be necessary and may involve displacing incumbent insurers to attain the best rates and conditions.

The report said, “Make no mistake, the marketplace is still in a state of some flux and should not be considered easy. While the rate increases that we’ve seen and that we predict are modest compared to some initial doomsday scenarios, they are still challenging for buyers. Moreover, there is some bleeding of the market-firming into other lines of insurance, which will also challenge buyers. That said, we do not see property rate increases escalating beyond our forecasts, and we think the duration of the current conditions will likely be limited to a few quarters.”

Key price predictions

The Property Market Update is an addendum to Willis Towers Watson’s 2018 Marketplace Realities report which was published in November 2017. A copy is available free of charge on the Willis Towers Watson website.

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

Media contact

Colleen McCarthy: +1 917 250 6699
[email protected]