Lower pricing is offered only to select accounts as insurers maintain underwriting discipline and avoid across-the-board discounts, says State of the Market Report
Iselin, N.J. — November 4, 2013 — Despite a well-capitalized insurance market, the price of property-catastrophe insurance is surprisingly flat as insurers resist competitive pressure, maintain underwriting discipline and offer lower prices only to select accounts. This is according to the fall 2013 issue of the biannual report State of the Market: NAPCO Property Catastrophe Insights from wholesale insurance broker NAPCO.
Combining broker insight and analysis of property-catastrophe indicators, this report examines industry performance, catastrophe losses and the outlook for the end of 2013 and beginning of 2014. Key findings include:
•Despite $600 million in policyholders’ surplus, insurers are only lowering prices for select accounts with good loss histories—not offering across the board discounts.
•Insurers are maintaining underwriting discipline and resisting pressure to underprice accounts because of the influence of catastrophe models, low interest rates, increased accountability from ratings agencies and other factors.
•Low catastrophe losses have helped insurers report very strong results for the first quarter of 2013, with a 43 percent increase in net income to $24.5 billion.
•Frame habitational market still struggles with prices spiking and insurers exiting market.
•Hailstorm claims were up 84 percent in 2012, so insurers are imposing percentage deductibles for Midwest wind and hail coverage.
“A combination of trends appears to be leading to flatter insurance cycles and we are cautioning buyers to temper expectations about lower prices,” said David Pagoumian, CEO/President of NAPCO. “Rather than responding to market spikes and dips, insurers are considering the individual merits of each account. Broad downward pressure on rates is inconsistent with our experience.”
This smoothing out of market cycles is traceable to a few trends, which the report highlights in detail. Catastrophe models are getting better a predicting large losses, so rating agencies have pressured insurers to avoid discounting too steeply. At the same time, insurers cannot raise prices when major incidents—like Hurricane Sandy—fail to impact the well-capitalized market.
Download the full NAPCO Insights Fall 2013.
About NAPCO — NAPCO (www.napcollc.com) is a leading wholesale broker of commercial property insurance coverage, providing retail agents and brokers with an efficient, single-source independent marketing arm for difficult placements that have significant exposure. The company utilizes in-depth research and sophisticated risk modeling to implement coverage and cost-effective programs. Headquartered in Iselin, N.J., NAPCO provides access to the global insurance market, including major and specialty domestic carriers, excess and surplus lines markets, reinsurers and international providers.