Marsh predicts cat-linked rate rises in 2012

Businesses exposed to natural catastrophe risk and supply chain perils are expected to see continued insurance rate increases in 2012 across Europe, the Middle East and Africa (EMEA), Marsh has predicted.

Substantial catastrophe losses and reduced investment returns prompted many insurers to seek rate increases in 2011, according to a new report published by the global broker today.

Marsh expects rate reductions for property risks to become less frequent in 2012 as underwriters continue to push for rises or restrict limits on accounts with significant losses or catastrophe exposures.

But companies with favourable claims records, robust data and little catastrophe exposure may be able to secure reductions at renewal in both property and liability classes of business.

Marsh expects the motor insurance market will remain challenging in many European countries in 2012 due to insurers’ continued concerns over high loss ratios.

Marsh Europe chief executive Martin South said: “Insurers are scrutinising renewals more closely than at any time in the last decade.

“While rates are generally expected to remain stable across Europe for the first half of 2012, the future implementation of Solvency II and other market factors may increase pressure from insurers to increase rates.”

The report says that while trends in financial and professional lines of business are inconsistent across EMEA, rates have continued to decline for middle market business as underwriters perceive it as a ‘better risk’.

Larger financial institutions have been unable to achieve further rate reductions, amid insurer concerns about the sector’s exposure to the Eurozone crisis and ongoing claims.

It also says competition still exists for trade credit business, although insurers expect rates to harden in 2012 with underwriters becoming more cautious and reviewing cover levels, especially in markets such as Greece and Italy.

Insurers believe that they are better prepared to handle a second financial crisis as they now have better financial information and more sophisticated techniques to assess the probability of default.