Downward pressure on property/casualty rates will lead to a less profitable year for insurance companies and brokers, a new analysis from Kroll Bond Rating Agency Inc. predicts.
The group anticipates that pricing will be flat to down over the next 12 to 18 months, led by decreases in commercial lines, property and reinsurance. Commercial lines are expected to slip into the low- to mid-single digits, while property and reinsurance rates could fall by more than 10% as favorable weather and economic conditions continue.
Exceptions include personal lines auto, which is anticipating notable increases, and cyber liability coverage, which Kroll expects to experience significant rate increases “until loss patterns emerge for specific coverages and forms.”
The predictions echo those made earlier last month by Willis North America.
Analysts with the risk advisory and brokerage firm released their outlooks for a number of lines in its “Marketplace Realities 2016” report, while commenting on the shrinking field of carrier partners after a year that saw several large acquisitions, including that of ACE Group and
Chubb Corp.
“In the short run consolidation shrinks the market. As two companies become one, the marketplace offers one less piece with which to solve the puzzle of an insurance program,” said Matt Keeping, Chief Broking Officer with Willis. “But a smaller market with fewer, larger players also opens up the field to new comers that can focus on smaller, specialized niches in areas of potential growth.”
Like Kroll, Willis expects the largest increases in property, with an average 15% to 12% decrease for catastrophe-exposed risks and -12.5% to -10% for non-catastrophe.
Other major decreases are likely for aviation (-20% to -15%), marine (-10% to flat), terrorism (-15% to -5%) and political risks (-5% to flat).
Along with its predictions for 2016, Kroll noted that 2015 will likely shape up to be another profitable year for property/casualty insurance.
“Dampened by record tornado losses in 2011 and Superstorm Sandy in 2012, industry results have been more favorable for the third consecutive year,” Kroll said in its report, adding that favorable earnings will place the industry surplus at or near its all-time high leading into the year
