A survey of underwriters and buyers shows that European customers are getting more insurance for less money, but insurers are becoming increasingly worried that price cutting may hurt profitability.
The report, released by the London office of Chicago-based Aon insurance brokerage, surveyed 140 property-casualty insurers and 104 insurance buyers from a cross section of industries during July, 2006.
Among the survey's findings, in a very competitive market, where prices are at a three-to-four-year low, insurers are offering broad covers to avoid rate reductions and keep ahead of their competitors.
"Europe remains a buyers' market," the report said.
"Following four years of profits, insurers are competing strongly for market share and there is no evidence yet of the indicators necessary to bring the soft market to a halt," said Simon Thompson, leader of Aon's global liability practice, in a statement.
For property insurance, the report said buyers are seeing reduced rates and broader cover, except U.S. catastrophe-prone areas.
On multiyear, multiline risks, there are some expectations of price increases for 2007 renewals, but there is reluctance on the part of insurers to offer such terms as they position themselves to take advantage of some upswing they might see in 2008, the report found.
Overall, barring any major disaster or significant market withdrawal, no change is expected in 2007, Aon said.
On general liability, Aon said the market is expected to remain stable through 2007 with plenty of capacity available. Clients are purchasing greater coverage, or lower retentions, instead of accepting premium reductions.
The only question mark lies with environmental liability, where the imposition of a European Union Directive on environmental clean-up may result in insurers rethinking their exposure and excluding pollution cover from their policies. The outgrowth of this may be the creation of a specific environmental market in Europe, according to the report.
The directors and officers market is still witnessing softening, and there is some belief the market may bottom out in 2007.
The line remains profitable for carriers, Aon continued, but it is growing beyond European shores and events outside of the continent could come into play. However, absent any major event, Aon said, "we anticipate benign market conditions continuing for 2007."
New to the report was an examination of broker value to clients and insurers. Insurers rated the broker relationship's most valuable service to be quality submissions, while buyers saw the role of negotiator and program placement, along with industry peer benchmarking as the most valuable service.
Copies of the report are available at www.aon.com under publications.
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