In a Marsh & McLennan Cos. Inc. report released on Wednesday, January 25, 2012, research indicates that commercial insurance rates in the United States will climb across a broad range of businesses this year due to high losses in 2011. Other contributing factors include the ongoing economic recession, and an overall decline in insurance profitability.
Record-Breaking Losses Tallied in 2011
The report, entitled “Navigating the Risk and Insurance Landscape: U.S. Insurance Market Report 2012″ identifies $105 billion in catastrophic insured losses for the worldwide property and casualty insurance industry last year. Although the capital position for the industry was not damaged severely, earnings were down, which will lead insurers to be more stringent in their underwriting practices in the coming year. Both the slow rate of economic recovery and reduced profitability will continue to affect this situation.
Of the losses recorded, approximately $25 billion were directly attributed to storms in the U.S., which included the massive tornado that leveled large portions of Joplin, Missouri in May 2011. Hurricane Irene, which was the first storm to make landfall since 2008, caused $7 billion in insured losses on its own.
Tighter Underwriting Practices Expected
David Bidmead, U.S. CEO of Marsh & McLennan said in the statement accompanying the report, “Carriers are expected to be extremely disciplined in their underwriting and seek rate increases where they can. Those insureds that are able to provide carriers with complete, accurate and quality data will be best positioned to navigate a changing insurance market and effectively differentiate themselves from others seeking critical capacity for catastrophe risks.”
Rates Were Already Trending Higher in the Fourth Quarter of 2011
Approximately half of the clients surveyed for the reports said that the cost of their property insurance had gone up during the last half of 2011. Increases trended to 10 percent or higher depending on the degree of risk associated with the customer. In the immediate wake of both storms and earthquakes, companies including Travelers Cos. and American International Group began to raise their rates. In the fourth quarter of 2011, U.S. commercial insurance rates were already up 2.8 percent according to data compiled by the Council of Insurance Agents & Brokers.
Other findings in the Marsh report included:
- General liability rates in 2011 saw fluctuations from 5 percent increases to comparable decreases in the fourth quarter.
- Workers compensation rates were flat or up 5 percent by the end of the year.
- Errors and omissions insurance rates went up and down plus and minus 5 percent through the fourth quarter.
The Marsh report provides in depth information on market trends for commercial insurance in all major business classes in approximately two dozen specialty lines and industries. The full text of the report can be found at imr. march.com. Marsh is a leader in both insurance broking and risk management and does business around the world.
