Too many insurers keep prices down when they should rise
Andrew Sainsbury, a partner at JLT Reinsurance Brokers told an AIRMIC briefing yesterday that insurers will have to underwrite for profit because insurers have become disconnected from reinsurers who have raised prices.
Speaking at AIRMIC’s 2010 Market Outlook - Stable Market or Calm before the Storm event he said: "Reinsurance rates are stabilising after several years of upward movement which so far insurers have not mirrored.
Against a backdrop of diminished future reserve releases, lower investment income and the expected recessionary impact on claims costs, the necessity of a profitable underwriting result means insurers will need to pass positive rate movements on to their clients.
“Only at this point in the cycle will the dislocation between insurance and reinsurance rates start to reduce".
Oversupply a problem
Nick Murrell, head of property, JLT, warned of oversupply among insurers keeping prices down. "The increased competition and pricing levels are putting insurers under pressure so there will be more opportunity in 2010 for structured programs and flexibility in limits and coverage. We are expecting continued downward pressure on rating and flat in some property areas i.e. the food Industry.
“Clients can benefit from maximising tripartite relationships between themselves, their broker and the insurer, which can encourage new product lines and better understanding that helps insurers to develop solutions for clients rather than one dimensional products".
