Cyber Risk, Political Risk and Sense of Changing Climate Create New Risk Profiles for Organizations
Broker Updates 2015 Marketplace Forecast for North American Insurance Buyers
NEW YORK, April 15, 2015 (GLOBE NEWSWIRE) -- Willis Group Holdings plc (NYSE:WSH), the global risk advisor insurance and reinsurance broker, expects Property/Casualty insurance buyers to experience largely buyer-friendly market conditions on most lines of business for the remainder of 2015, due in part to light catastrophe losses and a robust supply of capital from traditional and non-traditional sources. However, evolving threats generated from a range of risks – cyber attacks, political instability in many parts of the globe and the sense of a changing climate – pose risk management challenges for many organizations. These are key findings in Willis's 2015 Marketplace Realities Spring Update. The report, published today, serves as a guide for North American insurance buyers preparing for upcoming insurance program renewals and coincides with the Risk & Insurance Management Society's Annual Conference in New Orleans April 26-29.
Willis expects commercial Property rates to fall by an average of 12.5 – 15% for both non-catastrophe-exposed and catastrophe-exposed risks, due in part to a market flush with capacity, according to the report. Willis experts are watching the downward trend closely as further softening could occur. Insurance carrier appetite for this risk remains strong and with increased carrier capacity, buyers are enjoying ample options in determining where to place their business in 2015.
For commercial Casualty lines, capacity also remains abundant and Willis expects primary Casualty pricing at renewals to be flat. The pricing environment for Workers' Compensation is unchanged, with a mix of increases and decreases ranging between -5% and +5%, though California Workers' Compensation rates are expected to climb by 8%, which is still low by recent historical standards.
For Employee Benefits programs, Willis predicts rate increases of 5–6% for organizations with self-insured plans, and 8.5–9.5% for insured plans. Employers remain focused on elements of the health care reform law that will go into effect in the next few years, particularly the Cadillac Tax, effective in 2018. The Cadillac Tax is expected to impact a significantly larger number of employers than originally anticipated due to the increasing cost of health care.
The most surprising market softening can be seen in Aviation programs, where significant and high-profile catastrophes continue to seize the world's attention. There is still ample capacity in the marketplace and excluding these exceptional losses, the industry's safety experience remains good. These factors have combined to reverse Willis' earlier predictions of sharply increased rates for this sector. Insurance buyers can expect renewals to range between flat and +10% for the remainder of 2015.
Willis notes some exceptions to the broad downward trend and highlights several challenges in the marketplace, particularly for Cyber insurance. With cyber breaches becoming alarmingly common and increasingly severe, the demand for stand-alone Cyber policies is dramatically rising. Willis predicts increases of up to 10% for most buyers. However, organizations with point-of-sale (POS) exposures face 10% to 100%+ increases for primary premiums. Additional increases are likely in the excess layers of the program, due to paid claim activity. Underwriters are evaluating retailers and other organizations with POS systems with increased scrutiny. Adding to the upward pressure, some carriers in this space have increased their retentions, reduced their capacity or, in some cases, exited certain sectors.
Willis also expects rate increases on errors and omissions coverage for organizations with poor loss experience or difficult industry sectors currently at risk for large claims and litigation, such as technology firms. Some Environmental insurance programs, particularly combined Environmental plus Casualty programs, are experiencing sharp increases as Environmental claims against organizations continue to trend upward.
In the Executive Risks lines, buyers will find a mix of modest increases and decreases.
In introductory comments, Matt Keeping, Chief Broking Officer, Willis North America said, "Individual experiences will vary depending on industry, geography and loss history, but overall we anticipate a marketplace that continues to offer opportunities for buyers. With weather and other catastrophic losses remaining below average for another year, and capital hungry for a somewhat predictable return, we see the forces of supply and demand working as expected."
But challenges remain for organizations as risk profiles change, Keeping noted. "The threat of cyber-related losses seem to be a matter of not if, but when; the push for global markets is clashing with the realities of political upheaval and war in many places on the planet, making political risks increasingly unavoidable; and even if Nat Cat losses are down in the aggregate, there is the sense that a changing climate brings an increased potential for widespread catastrophe in heavily populated areas."
"Organizations will need to balance the pressure to keep costs down and the need to maximize resilience for the risk transfer spend – in other words, to make sure that the organization is sufficiently protected so that its greater goals can be met," Keeping said.
|Key Price Predictions for 2015:|
|Non-CAT Risks:||-12.5% to -15%|
|CAT-Exposed Risks:||-12.5% to -15%|
|Umbrella/Excess:||-10% to flat|
|Workers' Comp:||-2.5% to +2.5%; up to +8% in CA|
|Auto:||-10% to flat|
|Directors & Officers:||-5% to +5%|
|Errors & Omissions:||Flat to -5% or more for programs with good loss experience; +5 to +20% for programs with poor loss experience|
|Employment Practices Liability:||-3% to +3%|
|Fiduciary:||Flat to +5%|
|Flat to +5%; +10 to 125% for POS retailers; more competitive for first-time buyers|
|Airlines:||Flat to +10%|
|Aerospace:||-10% to flat|
|Self-Insured plans:||+5% to +6%|
|Insured plans:||+8.5% to +9.5%|
The Marketplace Realities series, which is published in the fall and updated every spring, features market snapshots of Property, Casualty, Workers' Compensation, Employee Benefits and all Executive Risks insurance lines, as well as key specialty lines: Aerospace, Cyber Risks, Construction, Energy (upstream and downstream), Environmental, Health Care Professional, Kidnap & Ransom, Marine, Political Risk, Surety, Terrorism and Trade Credit.
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 18,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world's leading authorities on analytics, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our Website, www.Willis.com, our leadership journal, Resilience, or our up-to-the-minute blog on breaking news, WilllisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.
Source:Willis Group Holdings