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Property & Casualty Market Update Summer, 2013

Property & Casualty Market Update Summer, 2013. Brian White, Vice President bwhite@alliant.com. APTA Risk Management Seminar Cincinnati, OH June 11, 2013. License No.: 0C36861. Change in Commercial Rate (by Account Size): 1999 through 2013. Percentage Change (%). Peak = 2001:Q4 +28.5%.

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Property & Casualty Market Update Summer, 2013

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  1. Property & Casualty Market UpdateSummer, 2013 Brian White, Vice President bwhite@alliant.com APTA Risk Management Seminar Cincinnati, OH June 11, 2013 License No.: 0C36861

  2. Change in Commercial Rate (by Account Size): 1999 through 2013 Percentage Change (%) Peak = 2001:Q4 +28.5% Pricing turned positive in Q3:2011, Pricing Turned Negative in Early 2004 KRW : No Lasting Impact Trough = 2007:Q3 -13.6% Source: Council of Insurance Agents and Brokers; Barclay’s Capital; Insurance Information Institute. Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.

  3. Market Comments • 2011 Was the Highest Loss Year on Record for Economic Losses Globally • Extraordinary accumulation of severe natural catastrophes: Earthquakes, tsunami, floods and tornadoes • $105 Billion in Insured Losses Globally. • Second only to 2005 (Hurricanes Katrina, Rita, & William) on an inflation adjusted basis • FM Global finished 2011 with a combined loss ratio of 121%; their worst year ever • No Dividend for 2012 • 2012 was significantly better, but losses including Superstorm Sandy ($77B) still made it the third largest loss year on record (Bloomberg / Swiss Re – 3/27/13) • FM Global declares dividend (effective June 30, 2013) despite large Sandy losses • Excess Workers’ Compensation is particularly challenging • 6 “real” markets, and that number quickly diminishes depending on venue, police or fire exposures, minimum premiums, SIRs, employee concentration and needed limits, etc.

  4. Market Comments • The market for Pacific Northwest Quake appears to be changing dramatically: • FM Global / Affiliated FM significantly reducing available capacity • Viable carriers that remain are/will carefully absorb market share • Carriers are also re-evaluating their Flood offerings, especially in the Northeast (surprise!), but any insured w/ A&V exposures or otherwise vulnerable to flooding should anticipate continued pressure; • Industry Surplus (“net assets”) is near record levels (and has been for several years now) – supply is plentiful but being strategically deployed where carriers believe they can maximize their profitability; • Interest Rates still low – restricting carriers’ investment portfolio returns, increased underwriting discipline; • Merges / Acquisition / “Trade” Activity within Brokerage Community is healthy – indicator of market expectations?

  5. What to Expect?

  6. Budgeting for the Near Term – “On Average” • Modest increases on Liability lines of coverage. (Rail more impacted that bus; especially primary markets, where 5%+ may be more appropriate.) • 0 to +10% rate on “non cat” exposed property. (Flood, Quake, & Wind can be a different story.) • +5 to +10% rate or more on Excess Workers’ Compensation. • Expect SIR Pressure depending on loss history, evaluate alternative SIRs for “premium / risk” reward. • Carefully evaluate “pooling” alternatives, which may present compelling options. • Reductions, while rarer in the current market, are not unheard of: • Market strategically and strike while the iron is hot; • Wildcard: What is Buffet up to? • Your agency’s market experience will be dependent on your risk characteristics, such as: loss experience, venue, SIRs, modes of transit you operate, growth (?), etc.

  7. Plan of Action General Suggestions: • Partner with well respected brokers/intermediaries • Start renewals well in advance • Develop relationships with your underwriters • Submission quality: • Completed applications, consistent underwriting data, accurate historical loss information, complete COPE information (construction, occupancy, protection, exposure), understand contractual relationships, be responsive to carrier inquiries Property Specific Suggestions: • Be prepared to provide flood zone determinations or elevation certificates – this data can help to mitigate adverse market reactions to flood exposed property. • Flood Emergency Response Plan (“FERPP”) • Effectively communicating how your agency will respond to a Flood can compel underwriters to take a softer approach to specific location related issues. • Catastrophe Modeling – discuss need with your trusted advisor.

  8. Q & A

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