Braced for change, the commercial insurance market remains stable and buyer-friendly: Willis Towers Watson report

ARLINGTON, Va., April 20, 2017 (GLOBE NEWSWIRE) — The commercial insurance marketplace remains stable and favorable to buyers, even as it braces for potential changes from Washington, D.C. These changes could alter marketplace dynamics that have sustained prolonged soft market conditions, according to global advisory, broking and solutions company Willis Towers Watson’s (NASDAQ:WLTW) 2017 Marketplace Realities report. The report, published today, serves as a guide for North American insurance buyers preparing for upcoming insurance program renewals.

The report points to the fluidity of capital as a key driver of current market conditions. Ample capacity has allowed the industry to absorb marketplace consolidation in the carrier space and a rise in catastrophic losses — although recent losses still remain below historical averages. The result has been good news for most buyers in many lines, with some notable exceptions.

In his introductory comments, Joseph C. Peiser, head of Broking for Willis Towers Watson North America, writes, “Trade, taxes, infrastructure, regulation: Change could be coming in all of these areas, with the potential to affect our clients, carrier partners and, therefore, the advice we offer. In terms of the marketplace mechanics and price predictions that are the focus of this publication, change is one thing we haven’t seen in a while. Will the transformation at hand turn this long, soft market?”

The report’s line-by-line predictions for the remainder of 2017 show a mix of increases, decreases and flat rates.

In the property market, despite deteriorating underwriting results and a 32% increase in catastrophe losses year over year, abundant capital continues to sustain an attractive market for buyers. Catastrophe-exposed programs continue to lead the softening cycle. The report forecasts property rates to decline 5% to 10% for companies without significant exposure to natural disasters and 5% to 12.5% for those more exposed. Buyers can also explore new opportunities to expand coverage under their property program to include some cyber events and nonphysical damage.

The casualty market continues to be favorable for most companies and most industries, with notable exceptions. As was the case last year, New York City construction projects, along with energy and trucking risks, are experiencing a tight casualty market.

Workers compensation costs are largely stable and forecast to see increases and decreases of roughly 2.5%. However, certain states continue to pose challenges to employers with large payrolls, including Massachusetts, New Jersey and New York. Additionally, there has been considerable attention on Florida, where court rulings and legislative change in 2016 have roiled the state’s workers compensation market, leading to an average approved rate increase of 14.5%.

The cyber insurance market appears robust, with new entrants coming into the marketplace and carriers taking steps to expand cyber coverage. However, the threat of cyber risk continues to escalate, and cyber renewals are facing primary premium increases of 5% to 10% for most buyers, and 15% to 20% for point-of-sale retailers and large health care companies with no loss experience. For organizations that can demonstrate strong risk controls, premium increases can be softened.

In the financial and executive risk lines, ample capacity and competition continue to drive a soft directors and officers liability (D&O) market. With innovation, buyers have an opportunity to get more value out of their D&O coverage, particularly in the areas of investigations, cyber-related D&O protections and M&A exposures. However, the report notes the record number of Q1 securities class action filings could potentially reverse the soft market.

Despite rising political risk exposures across the globe, the political risk insurance market remains open and competitive due to the continued influx of capital, with some exceptions in the riskiest locales. However, the report warns multinational companies to consider buying political risk coverage on operations worldwide — particularly for select regions — while it is still available, as coverage will constrict considerably after an event.

In the employee benefit space, predicted rate increases maintain, at 4% to 5% for self-insured plans and 7% to 8% for insured plans. Uncertainty remains, however, even after the government’s effort to replace or repeal Obamacare fell short.

Key price predictions for 2017

Non-cat risks –5% to –10%
Cat-exposed risks  –5 to –12.5%
General liability -5% to flat; +5% to +10% for risks with losses
Umbrella/Excess -10% to flat; +10% for truckers and NYC construction
Workers comp -2.5% to +2.5%; +15% in Florida
Auto +3% to +10%
International -10% to flat; –5% to flat for Defense Base Act coverage
Executive risks
Directors and officers -12% to flat
Errors and omissions Flat to +5%; +15% to +20% for poor loss experience or loss-prone industries
Employment practice liability Flat to +5%; +5% to +15% in California
Fiduciary   -5% to +5%
Cyber risk
+5% to +10%; +15% to +20% for POS retailers and large health care; competitive for first-time buyers
Self-insured plans +4.5% to +5.5%
Insured plans +7.2% to +8.2%
Political risk
Most risks -2% to flat
Active hot spots Capacity limited
Non-tier 1 -10% to –5%
Tier 1  -5% to flat
Trade credit
Most buyers Flat to +5%

The Marketplace Realities series is published in the fall and updated every spring. The publication is available free of charge on the Willis Towers Watson website. Also, view a video message from Joe Peiser.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at


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