Most segments of the U.S. insurance market are soft, concluded an Aon Corp. report released Wednesday.
In its 2010 U.S. Insurance Market Overview, the Chicago-based broker said buyers can expect flat to decreasing prices in property/casualty, directors and officers liability, and kidnap and ransom insurance. Insurers’ financial performance has improved notably since late 2008 and early 2009, the report said.
“The insurance industry has essentially recovered from the impact of the financial crisis,” Aon said in the report. “However, the impact of the recession on the pricing cycle is still being played out.”
The recession has diminished claims activity and a benign 2009 U.S. hurricane season helped create an environment favorable to insurance buyers, the report said.
In the property sector, Aon said rates are expected to decrease 5% to 15% this year, due in part to competition and capacity that is expected to grow. The market hardened briefly during the first half of 2009 before rates flattened in the last two quarters of the year. Policyholders who renewed during the harder market could see rate decreases of more than 15% this year, Aon said.
Casualty insurers are aggressively pursuing market share and buyers with favorable loss histories can expect flat to single-digit rate decreases this year, Aon said. Riskier accounts may see primary insurance rates increase, although excess coverage may stay soft because of competition, the broker said.
Buyers of D&O cover will continue to see a soft market for the foreseeable future. Even financial institutions, which were hit hard by the credit crisis and saw significant rate increases in 2008 and 2009, are seeing those rate increases level off, Aon said. A major reason is abundant capacity. “Theoretical capacity” for D&O buyers increased 16% in 2009 and more new insurers are expected to enter the market this year, Aon said.
Increasing capacity for K&R cover has stabilized rates, making larger limits more attractively priced, the report said.
Most buyers of employment practices liability insurance also face generally soft rates, although investment banks and other financial institutions will see fairly hard pricing, Aon said. And the market for employers with 10,000 workers or more is volatile because of a shortage of primary insurers.
In the fidelity and crime sector, rates are likely to stabilize or increase slightly for financial institutions this year, Aon said.
Original Post: http://www.businessinsurance.com/apps/pbcs.dll/article?AID=/20100526/NEWS/100529935 | Posted On: May 26, 2010 3:03 PM CENTRAL | Zack Phillips