Rate increases slower than predicted

Aon is warning that insurers may reduce the amount of capital they’re willing to commit to the food industry in Q4 2009 and into 2010.

The broker said that only companies that can prove they have a constructive and proactive approach to understanding and managing risk will maintain a positive response from insurers.

It said that by comparison, nearly all other UK sectors are likely to see little change in rates for property, liability and motor insurance if renewing their policies in Q4, according to its quarterly index that tracks the UK underwriters’ premium predictions for property, liability and motor fleet insurance - Aon Market Pulse.

It also found that 70% of underwriters are predicting motor rates to move slowly upwards during the end of 2009 but 68% and 64% expect no rate change or decreases in property and casualty insurance, respectively.

The report claims that insurers’ desire to increase rates has been thwarted by the entry of new capacity into the mid-market further driving competition, adding that increased pricing attracts new capacity to the sectors perceived to be problematic or challenging but this has proven to normally mean increased premiums.

Steve Redgwell, head of broking for Aon’s mid to large sized companies, said: “Competition remains very strong as we come to the final months of 2009, which will keep rates at the levels already experienced in the first three quarters of 2009. Into 2010, however, a combination of a continued softening market over the past five to six years, lower reserve releases and weak investment returns will lead to premium increases. This will be at a slower pace than previously predicted.

“The market remains very competitive and whilst rate increases have mainly been selective and imposed on poorer performing trades and risks, the view of insurers is that increases will start to show on a more general basis in 2010.”