Iselin, NJ (PRWEB) December 15, 2010
With the threat of major hurricane losses fading, catastrophe property insurance underwriters are reducing prices in the hopes of meeting end-of-the-year sales goals, and the market is now so well capitalized that catastrophe losses would have to total more than $50 billion for a dramatic change in the soft market conditions, according to a new State of the Market report by NAPCO LLC, a wholesale broker specializing in catastrophe property coverage.
The report is a compilation of catastrophe property market statistics and will be published two times a year. The full report can be found at: http://www.napcollc.com/articles/NAPCOInsuranceInsights-TheStateOfTheMarket-2010-December.pdf
According to the report, the property catastrophe insurance market is flooded with capacity, helped by relatively low U.S. catastrophe losses in the second and third quarters and bolstered by the return of a more stable investment environment after the financial crisis of 2008. This is creating an intensely competitive market where underwriters are cutting prices in many areas in a bid to retain or capture business.
“Most accounts will see price reductions at renewal, depending on their individual loss experience; however, those that have already had significant reductions in prior renewals may receive only modest decreases,” said David Pagoumian, NAPCO CEO. “Even in a soft market, it makes sense to act strategically, focusing on more than just price and avoiding a reliance on capacity from just one carrier so you have more options when market conditions change.”
The report finds that underwriters may be nearing the point where they will not be able to cut rates any further. Rate decreases in 2011 will not be as dramatic as they have been, and prices may flatten out as underwriters look to stabilize their portfolios. Rising loss ratios and a decline in reserve releases point to an underlying shift in market dynamics.
Impact of Low Hurricane Losses
After a very quiet hurricane season in 2009, hurricane losses so far this year have been minimal. As the memory of Hurricane Katrina moves further into the distance, underwriters are relaxing their guard and are competing for business they would have avoided a few years ago:
Reinsurance Rates Declined
Pricing and Underwriting
Market conditions remain soft but may stabilize in 2011 as underwriters begin to analyze pure underwriting profitability more strategically:
The combination of available capacity and a very low loss frequency has led to a continued softening of the market for terrorism insurance.
Given these findings, NAPCO recommends that agents and brokers placing catastrophe property insurance maintain a sensible plan:
NAPCO (http://www.napcollc.com) is a leading wholesale broker of commercial property and casualty insurance coverage. The company provides retail agents and brokers with an efficient, single-source independent marketing arm for difficult placements that have significant property and casualty exposure. NAPCO utilizes in-depth research and sophisticated risk modeling to implement coverage and cost-effective programs for its clients. Headquartered in Iselin, N.J., NAPCO provides access to the global insurance market, including major and specialty domestic carriers, excess and surplus lines markets, re-insurers and international providers of capacity.