Research shows record cat losses have had little impact on market
Insurance rate increases were confined to loss-affected exposures despite record first-quarter catastrophe losses, according to Marsh’s spring market update.
The report shows little change in market conditions during the first quarter of 2011 in regions and for classes of business not affected by recent losses. It puts the lack of a shift down to overall insurance capacity remaining plentiful, especially for new business.
The update also shows that property rate reductions may still be generally achievable, though more difficult to obtain.
Organisations with exposures to catastrophes, especially those situated in regions affected by recent events, are however likely see increased rates at renewal, according to the research.
It says that despite no immediate turn in the market, many insurers’ and reinsurers’ 2011 budgets for catastrophe losses have already been substantially eroded, if not exceeded, due to first-quarter losses, including those from the Australian floods, the February 22 earthquake near Christchurch, New Zealand, and the devastating March 11 earthquake, tsunami, and nuclear disaster in Japan. Additional catastrophe losses could impact reinsurance pricing.
The report also notes that following substantial disruption to global supply chains as a result of the Japanese disaster, many organisations are reassessing their vulnerability to such events and the efficacy of their risk management programs.
Marsh US Property Practice Leader Duncan Ellis said: “The events in Japan exposed significant gaps in business resiliency at a number of firms.
“This further highlights the need for organisations to take a 360-degree view of their end-to-end supply chain identifying demand, supplier, and operational risks as well as the financial impact of failures.
“Organisations seeking to deliver their products and services to market better, faster and cheaper, yet take a blind eye to the increased volatility and potential impacts of a disruptive event such advances can have, are putting their organisations’ balance sheets at risk.”
