9 December 2009

Insurance market defies expectations of hardening rates

Insurance markets have defied expectations of an across-the-board hardening in insurance rates, according to a new report released by Marsh today. The report states that deteriorating loss records, reduced investment returns and increased reinsurance costs for insurers have not been enough to considerably lift rates, with a sustained supply of capital keeping insurers competitive.

Roger McCallum of Placement Services at Marsh, said the insurance market is moving through an interesting period.

“Even despite the near-collapse of AIG and the need for government intervention, the last twelve months have taught us that many parts of industry are in relatively good health and are able to sustain significant balance sheet pressures and maintain ample levels of risk capital.

 “Looking ahead, as the economy recovers and interest rates start to rise, the pressures that insurers have faced over the last 12 months will start to reduce. We’re still cautious, however, about the ever-present potential for a series of market-turning triggers which could dent capacity,” Mr McCallum said.

There have been some notable exceptions to the general trend. The cost of trade credit insurance, for example, has risen significantly over the last twelve months, while financial institutions, financial planners, funds managers and real estate funds continue to face hikes in their professional liability premiums. The Marsh Insurance Market Review details the varying trends across each major class of insurance and across different business segments and geographies. Click here to download a copy of the report.