NU Online News Service, May 3, 1:12 p.m. EDT
First-quarter catastrophes could have a negative impact on the property-catastrophe market as underwriters deal with a combination of losses and changes to their risk profile, according a broker's report.
Commenting on the report, Lockton's Jim Rubel, executive vice president, director of property and energy, says recent events “are sending shockwaves throughout the global property-catastrophe market and could lead to restrict capacity and possibly even increase rates.”
On the commercial property side, the report, Property and Casualty Overview, says the early-year catastrophes that include the March 11 earthquake in Japan could lead to restrictions in capacity and increases in rates. Rates are now in a state of flux. Buyers, it adds, “can no longer expect to find a market ready to compete aggressively on price”—and this especially holds true for catastrophe-exposed risks.
On the casualty side, “extraordinary events” have created “uncertainty about the market direction.” But that uncertainty is still dependent on “carrier behavior” as competitors show an eagerness to “provide alternatives” if incumbent insurers seek to increase prices.
Reinsurers are expected to tighten the management of catastrophe aggregate with greater focus. Underwriting discipline will increase for hurricane and earthquake risks as the “market remains decidedly uncertain.”
Helping to mitigate the increases, insurer's surplus was up to $556 billion last year, increasing by $50 billion.
“The high level of capacity may extend the soft market, despite the high number of cat losses that will begin to have an impact in 2011,” the report notes.
During 2010, insurers' combined ratio increased to 102.4 from 101 for the previous year, based on information from the Insurance Information Institute.
Underwriting results were offset by investment gains and reserve releases, the report notes. Net written premiums began to increase after four year of decline.
Another positive note, while pricing remains soft, the rate decline has slowed and there has been a slow rebound in the economy, Lockton says.
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