Property, casualty, commercial insurance to soften further in 2016: Willis

Rates across the majority of the property/casualty and commercial insurance sector will experience further, significant softening in 2016, with property catastrophe exposed lines potentially falling by as much as 15%, according to Willis Group Holdings.

Rates across many insurance and reinsurance business lines have declined in recent times as the challenging operating landscape persists.

Trends driving steep and continuous price reductions in the property re/insurance market, which includes a benign loss environment, ample capacity, low interest rates, and heightened competition, have filtered down into the wider risk transfer market, impacting the operations of those in the casualty arena and beyond.

Insurance and reinsurance broker and global risk advisory firm, Willis, echoes this point; “Relatively benign losses and an oversupply of capacity from traditional and non-traditional sources are fuelling current marketplace conditions.”

And with market pressures showing no signs of letting up as the industry approaches the key January 1st, 2016 renewal season, analysts at Willis predict more of the same going into the New Year.

In fact, Willis expects rates in the property insurance sector during 2016 to fall by up to 12.5% for non-catastrophe exposed risks, and by as much as 15% for catastrophe exposed risks.

The only line of business Willis says could experience steeper rate declines than non-cat exposed property business, is with general and airlines aviation pricing, which Willis claims could see declines of up to 20% in 2016.

“True, the decline of property rates we predict here is less steep than the decline we predicted in April (apparently Property rates have fallen so much in the last couple of cycles there’s not much further they can fall), but casualty rates have now joined the downward trend, and other specialty lines (Political Risk and Aviation) moved from our “flat” list to our “expecting decreases” list,” explains Willis.

The message from Willis, in its recently published report, ‘Marketplace Realities 2016, Bringing The Pieces Together,’ suggests a truly softening market in 2016, as pricing across the majority of property, casualty and commercial insurance lines are predicted to decline further.

With the reinsurance market undergoing significant change driven by a search for scale and relevance in an increasingly competitive marketplace, and a substantial rise in the volume of alternative capital entering the space, reinsurers have started to deploy capital into less competitive, and potentially more profitable business lines, away from the property sector.

However, as the influx of capacity and rise in willing and able investors and sponsors to access risks in the casualty market and beyond grows, the same drivers behind the challenging property re/insurance market environment will likely lead to similar, steep price reductions across numerous primary lines.

The risk here is that at some point, and perhaps not too far into the future reinsurers will have no place left to turn, and could struggle to deploy capital as competition and capacity becomes abundant across the bulk of property, casualty and commercial insurance segments.

Rates can only be pushed so far, which is why some industry analysts and experts have predicted single-digit rate declines for the reinsurance sector at 1/1, under the premise that market participants are increasingly aware a floor is being reached and underwriting discipline is prevailing.

It will be interesting to see just how far rates fall for differing insurance business lines in 2016, and just how much of an impact the challenging reinsurance landscape has on operations outside of the property arena.

No doubt analysts, experts and executives in the global insurance and reinsurance industry will hold varied opinions of just how severe rate reductions will be for certain lines of business, but the warning from Willis is that further, challenging softening is expected at 1/1 2016 and beyond, across many sectors.