Record CAT losses prompt two-speed insurance market

The many natural disasters occurring in the world are creating a “two-speed” insurance market with businesses in affected areas or with losses experiencing insurance premium increases while reductions are still achievable for others, according to Marsh in its newly released Global Quarterly Insurance Market Briefing for Q4 2011.

Marsh, a global insurance broking and risk management firm, says that despite record insured catastrophe losses of more than US$100 billion in 2011, capacity in the global insurance market remains plentiful and across the board rate rises are not being seen.

Insurers, however, are responding to the record losses by seeking rate increases on accounts with significant losses and catastrophe exposures. For example, almost half of Marsh’s US property insurance clients experienced rate increases at renewal during the second half of 2011, compared to 31% in the first half.

While most of those rate increases were applied to programs with catastrophe exposure, accounts with little or no such exposure or losses were often able to secure rate decreases during the second half of the year.

“The global insurance market remains well-capitalised and generally competitive,” said Geoff Lambrou, Head of Placement for Asia, Marsh. “Market fundamentals remain generally strong.”

Since the second quarter there has not been any overall change in market pricing. Although insurers are more mindful of aggregate exposure and reduced capacity in some loss-affected lines, there has not been any marked general movement.

According to Marsh’s report, countries affected by major catastrophe events during the year saw the largest property catastrophe rate increases in the quarter. In Japan, programs with earthquake risks typically renewed with increases of up to 50%. In Thailand, where insured losses from flooding around Bangkok are estimated to be greater than US$10 billion, programs are being renewed with increases of up to 30%.