Marsh’s U.S. Casualty Practice sees a number of new insurance trends shaping the market in 2015, including a softening market, new capacity, and the greater use of data to enhance underwriting. Marsh identified 10 anticipated trends in all.
Here they are, in abridged form:
1. A softening market. Marsh noted that casualty insurance rates remain stable at the moment, but predicted they’ll soften through 2015 as the magnitude of average rates increases continues to slow past already sputtering levels we’ve seen in 2014. We can thank for this insurers who may have to pass savings onto their clients to keep their competitive advantage. With that in play, more price slowing would turn average rate changes negative.
2. New capacity. Asian markets looking to expand their footprints, U.S. acquisitions by outside players and others are seeking to tap into record policyholder surpluses. They’re driven in part by the workers’ compensation line and its return to profitability, Marsh said.
3. Alternative capital won’t transform casualty reinsurance. Marsh acknowledged that new money has encouraged traditional property reinsurers to shift their focus to casualty, and that some reinsurers have launched specialty and casualty reinsurance coverages in the U.S. Marsh noted, however, that “the casualty space continues to be untapped on a direct basis” in terms of alternative capital.
4. Upward rate pressure on harder-to-place risks. Marsh said it sees workers compensation in several subcategories, trucking fleets and New York labor-law exposed risks as gaining favor – all traditionally harder to place. Why? Underwriters are shifting their attention to “favored classes with good loss experience,” leaving less competition for harder-to-place risks.
5. A continued march toward data. Marsh said carriers are increasingly using analytics for enhancing underwriting profitability, and insurance buyers see it as a tool to help them nail down favorable terms for pricing, structure, terms and conditions.
6. A bigger focus on standing out.Insurers will try to stand out from the pack based on flexibility and relationship. A specific subset of that trend: greater acceptance of alternative collateral forms versus letter of credit.
7. Data will shape claims handling. Marsh noted that data and enhanced analytics, as it becomes more prolific, will give insurers more insight into loss costs, which is “often the most significant component of the total cost of risk.”
8. Bigger settlements and judgments will shape insurance buying decisions. Marsh said it sees more severe individual, multi-district and class-action settlements and judgments as leading to more difficult coverage, plus claims negotiations related to excess liability.
9. Innovation. Marsh said it expects carriers to have to make policy wordings less ambiguous and complex, and to concoct new products that address equally novel exposures. This means carriers will continue to evolve their approaches in areas including cyber coverage, professional liability, pollution and communicable disease. Buzzwords here include “proactive” and “innovative” in terms of how the U.S. casualty market will be responding with coverage options.
10. Globalization. Marsh predicts acceleration of a trend where primary insurers are restructuring to make their domestic underwriting teams more in synch with their international casualty products. “Global primary product offerings will likely become more common,” Marsh said.
Source: Marsh USA