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Brokers Say P&C Market Is Softening

Later this week Aon Corp., Marsh & McLennan Cos. and Willis Group Holdings Ltd. will release reports stating that some P&C rates have started to...
April 20, 2004

Later this week Aon Corp., Marsh & McLennan Cos. and Willis Group Holdings Ltd. will release reports stating that some P&C rates have started to rise more slowly or even begun to fall compared to rates over the past few years. They specifically point to softer conditions for property, terrorism, and directors-and-officers insurance, with the latter notably showing some declines in rates for businesses outside of certain high-risk lines of business. Aon reports that rates for U.S. commercial-property buyers fell an average of 10% in 2003. Willis points out that not all casualty rates are seeing conditions improve, noting that workers comp rates continue to rise.

Rates for terrorism insurance dropped 42% between the second and fourth quarters of 2004, according to Marsh, and nearly one-third of companies opted to purchase it when renewing their policies in the fourth quarter. This is up from 27% in the two prior quarters. However, uncertainty about whether the Terrorism Risk Insurance Act (TRIA) will be renewed beyond its current December 31, 2005 expiration date could lead to increased volatility in this area.

What It Means to Agents: PIA has been advocating for early renewal of TRIA since late last year. Renewal is key to our clients having terrorism coverage for their obligations. The renewal cycle in P&C insurance means that carriers will be renewing insurance with exposure into 2006 as early as January 1, 2005. Those renewals will be processed 90 to 120 days in advance of that, and rates & reserving must be decided another 90-120 days before that (May 2004). So, from a practical standpoint the P&C sector needs a clear understanding in just a few months from the Administration and Congress that TRIA will be continued.

Three Major Brokers Report Rates Rising More Slowly; Big Profits May Be on Wane (Wall Street Journal, 4/19/04, subscription only)

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