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Mixed commercial insurance market still favors buyers: Willis Towers Watson report

Marketplace Realities report offers 2017 forecast for North American insurance buyers

ARLINGTON, Va., Oct. 26, 2016 (GLOBE NEWSWIRE) -- The marketplace for property, casualty and other lines of commercial insurance will continue to favor insurance buyers in 2017, particularly those with comprehensive strategic risk management and risk transfer strategies, according to global advisory, broking and solutions company Willis Towers Watson’s (NASDAQ:WLTW) 2017 Marketplace Realities report. The report, published today, serves as a guide directed to North American insurance buyers preparing for upcoming insurance program renewals.

The report points to a strong supply of marketplace capacity as a key driver in market conditions. The ample capacity will likely allow insurers to absorb any increases in natural catastrophe losses in 2016, including those stemming from Hurricane Matthew and the Atlantic hurricane season. Despite mostly favorable conditions, some lines of insurance coverage are experiencing rate increases driven largely by growing losses in those segments. Overall, buyers’ individual risk profiles will dictate the ultimate treatment they receive at the negotiating table, the report said.

“The mix of increases and decreases, while subject to some change line by line, overall remains steady,” said Matt Keeping, head of broking, North America. “The marketplace continues to offer opportunities for buyers, but as always, strategic planning yields the best results. The key point for buyers is to understand the nuances of the market so they can optimize their risk management programs.”

In the property market, the ongoing declining rate trend, which has caused observers to declare for several years that the market has bottomed out, continues. Catastrophe-exposed programs, having led the softening cycle last year, continue to lead the declines. Property rates are expected to decline 7.5% to 10% for companies without significant exposure to natural disasters and 10% to 12.5% for those more exposed.

For general liability, rates for 2017 are expected to be –5% to flat, although buyers with recent claims can anticipate increases of 5% to 10%. Workers compensation costs are forecast to remain steady, with small increases or decreases for most buyers. In the auto liability line, an increase in the frequency and severity of losses is driving up rates as much as 10%. International casualty rates, included in the Marketplace Realities report as a stand-alone segment for the first time, are predicted to remain flat or fall by up to 10%.

Cyber-renewals are facing primary premium increases of 5% to 10% for most buyers, and 15% to 20% for point-of-sale retailers and large health care companies with no loss experience. For organizations able to demonstrate strong risk controls, premium increases can be softened thanks to increased competition in the marketplace. Meanwhile, organizations that operate in the middle-market space (annual revenues below $1 billion) can expect a very competitive cyber-market with aggressive pricing and broad policy language, as many carriers are eager to write these accounts.

In executive risk lines, buyers will continue to find a mix of modest increases and decreases, with rate increases driven largely by adverse risk profiles. For example, in the errors and omissions market, large technology companies with new media and service offerings can expect to see rate increases due to expanding global privacy laws. Meanwhile, the directors and officers liability market remains robust as insurers roll out coverage enhancements and buyers are obtaining unprecedented value in the trade-off between terms and price.

In the health care and employee benefit space, uncertainty remains high after the government put the brakes on two proposed insurance carrier megamergers, and questions continue about the evolution of health care reform following the presidential election. Predicted rate increases are edging upward: 4% to 5% for self-insured plans and 7% to 8% for insured plans.

The search for growth

“While insurance companies have been struggling to achieve the level of growth that shareholders and industry analysts hope to see, the overall stability of the industry — its ability to absorb losses, pay claims following catastrophes and support sustainable business growth — is a positive sign,” Keeping said.

Yet growth could be driven by other forces, including innovation, Keeping noted. “In our view, exploring the critical intersections between corporate risk, talent and assets offers a unique path to growth. Historically, the industry has viewed these areas of risk in silos, but with a keen vision and the application of sophisticated data and modeling, we can begin to deliver new perspectives on risk that will propel the industry in new directions.”

Key price predictions for 2017

Non-cat risks: –7.5% to –10%
Cat-exposed risks: –10% to –12.5%
General liability: –5% to flat; +5% to +10% for risks with losses
Umbrella/Excess: –10% to flat; +10% for truckers and NYC construction
Workers comp: –2.5% to +2.5%; +15% in Florida
Auto: +3% to +10%
International: Flat to +10%; –5% to flat for Defense Base Act coverage
Executive risks
Directors and officers: –7.5% to flat
Errors and omissions: Flat to +5%; +15% to +20% for poor loss experience or loss-prone industries
Employment practices liability: Flat to +3%; +5% to +15% in California
Fiduciary: –5% to +5%
+5% to +10%; +15% to +20% for POS retailers and large health care; competitive for first-time buyers
Self-insured plans: +4% to +5%
Insured plans: +7.5% to +8.5%
Political risk
Most risks: –2% to flat
Active hot spots: Capacity limited
Non-tier 1: –5% to –10%
Tier 1: Flat to –5%
Trade credit
Most buyers Flat to +5%
With South American or East European risks +5% to +10%

The Marketplace Realities series, which is published in the fall and updated every spring, features market snapshots of property, casualty, workers compensation, employee benefit and all executive risk insurance lines, as well as key specialty lines: aerospace, cyber, construction, energy (upstream and downstream), environmental, health care professional, kidnap and ransom, marine, political, surety, terrorism and trade credit.

The publication is available free of charge on the Willis Towers Watson website. Also, view a video message from Matt Keeping.

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 39,000 employees in more than 120 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

Media contact
Colleen McCarthy: +1 212 915 8307

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