Commercial market stable in 2012

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Commercial market stable in 2012

Insurers to seek rate increases where they can, says Marsh.

January 24, 2012

Canadian commercial insurance rates are expected to remain stable across most lines of business in 2012, continuing a trend that began in the second half of 2011, according to Marsh. The company adds that substantial catastrophe losses and reduced investment returns prompted many insurers to seek rate increases in 2011.

Property insurance rate reductions will likely cease in 2012, especially for Canadian insureds with significant loss histories or US catastrophe exposures, Marsh notes. Companies with US catastrophe exposure will likely see rate increases of up to 15%.

Rates for financial and professional lines, including for directors and officers (D&O) liability, are expected to remain stable in 2012, although some rate decreases are still achievable.

“Entering 2012, the Canadian insurance market remains in a state of transition,” said Alan Garner, president and CEO, Marsh Canada Limited. “Insurers are expected to be extremely disciplined in their underwriting and seek rate increases where they can. Those insureds that are able to provide insurers with complete, accurate, and quality data will be best positioned to secure more competitive rates at renewal.”

Major findings from Marsh include the following:

Generally, market rate reductions are expected to cease in 2012; most companies will see flat renewals to small increases—of 5% to 7%—in the first half of 2012. There may be some rare exceptions to this trend for insureds with superior risk profiles.

Rate reductions for P&C may still be possible within the small and midsize commercial market, where competition among insurers remains strong.

The directors and officers (D&O) insurance marketplace remains highly competitive as a result of new market entrants; attempts by some carriers to rebalance portfolios that are over-exposed to US litigation; and the overall financial health of the Canadian insurance industry.

Many insurers continue to view Canada as a good place to do business, which has continued to fuel competition in the marketplace; however, mergers and reorganizations in the insurance industry could negatively impact available capacity in 2012.