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Property & Casualty Market Update Summer, 2013 Brian White, Vice President License No.: 0C36861 APTA Risk Management Seminar Cincinnati,

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Presentation on theme: "Property & Casualty Market Update Summer, 2013 Brian White, Vice President License No.: 0C36861 APTA Risk Management Seminar Cincinnati,"— Presentation transcript:

1 Property & Casualty Market Update Summer, 2013 Brian White, Vice President License No.: 0C36861 APTA Risk Management Seminar Cincinnati, OH June 11, 2013

2 2 Change in Commercial Rate (by Account Size): 1999 through 2013 Source: Council of Insurance Agents and Brokers; Barclays Capital; Insurance Information Institute. Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially. Percentage Change (%) Trough = 2007:Q % KRW : No Lasting Impact Pricing Turned Negative in Early 2004 Peak = 2001:Q % Pricing turned positive in Q3:2011,

3 3 Market Comments 2011 Was the Highest Loss Year on Record for Economic Losses Globally Extraordinary accumulation of severe natural catastrophes: Earthquakes, tsunami, floods and tornadoes $105 Billion in Insured Losses Globally. Second only to 2005 (Hurricanes Katrina, Rita, & William) on an inflation adjusted basis FM Global finished 2011 with a combined loss ratio of 121%; their worst year ever No Dividend for was significantly better, but losses including Superstorm Sandy ($77B) still made it the third largest loss year on record (Bloomberg / Swiss Re – 3/27/13) FM Global declares dividend (effective June 30, 2013) despite large Sandy losses Excess Workers Compensation is particularly challenging 6 real markets, and that number quickly diminishes depending on venue, police or fire exposures, minimum premiums, SIRs, employee concentration and needed limits, etc.

4 Market Comments The market for Pacific Northwest Quake appears to be changing dramatically: FM Global / Affiliated FM significantly reducing available capacity Viable carriers that remain are/will carefully absorb market share Carriers are also re-evaluating their Flood offerings, especially in the Northeast (surprise!), but any insured w/ A&V exposures or otherwise vulnerable to flooding should anticipate continued pressure; Industry Surplus (net assets) is near record levels (and has been for several years now) – supply is plentiful but being strategically deployed where carriers believe they can maximize their profitability; Interest Rates still low – restricting carriers investment portfolio returns, increased underwriting discipline; Merges / Acquisition / Trade Activity within Brokerage Community is healthy – indicator of market expectations? 4

5 What to Expect? 5

6 Budgeting for the Near Term – On Average Modest increases on Liability lines of coverage. (Rail more impacted that bus; especially primary markets, where 5%+ may be more appropriate.) 0 to +10% rate on non cat exposed property. (Flood, Quake, & Wind can be a different story.) +5 to +10% rate or more on Excess Workers Compensation. Expect SIR Pressure depending on loss history, evaluate alternative SIRs for premium / risk reward. Carefully evaluate pooling alternatives, which may present compelling options. Reductions, while rarer in the current market, are not unheard of: Market strategically and strike while the iron is hot; Wildcard: What is Buffet up to? Your agencys market experience will be dependent on your risk characteristics, such as: loss experience, venue, SIRs, modes of transit you operate, growth (?), etc. 6

7 Plan of Action General Suggestions: Partner with well respected brokers/intermediaries Start renewals well in advance Develop relationships with your underwriters Submission quality: Completed applications, consistent underwriting data, accurate historical loss information, complete COPE information (construction, occupancy, protection, exposure), understand contractual relationships, be responsive to carrier inquiries Property Specific Suggestions: Be prepared to provide flood zone determinations or elevation certificates – this data can help to mitigate adverse market reactions to flood exposed property. Flood Emergency Response Plan (FERPP) Effectively communicating how your agency will respond to a Flood can compel underwriters to take a softer approach to specific location related issues. Catastrophe Modeling – discuss need with your trusted advisor. 7

8 Q & A 8


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