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In Full: Property D&F Rates Flatten at 1 July

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  • Topics:
    • Property - International
    • Property - North America
    • Property - UK
    • Rates
    • Topical Trends

Early indications suggest the decline in property direct and facultative (D&F) rates eased at 1 July as both binder and open market business renewed between stable and 5 percent down...

Sources told The Insurance Insider that London markets are pushing back on further rate reductions as technical profitability comes increasingly under threat. This time last year rate declines were comfortably in the double digits.

 

The renewal date coincides with the Lloyd's syndicate business planning for 2018, and some believe that revisiting the numbers has given a stark reminder of the weak profitability of the class.

 

A number of London-based underwriters said they had refused business based on unattractive rate demands, only for the broker to come back to them at a later date willing to accept more favourable terms.

 

However, US domestic players are still "giving it away, with freebies", meaning the market as a whole is refusing to harden, it was suggested.

 

The 1 July is major renewal date for US accounts, with some international D&F renewals also taking place.

 

But renewal rates are not responding to the loss experience in the US over the past year, sources said.

 

Severe US weather last month caused almost $3bn of insured losses , with nearly half the damage attributed to a single hailstorm in Colorado, according to Aon Benfield's Impact Forecasting.

 

Meanwhile, in April the Insurance Council of Texas estimated that insured losses stemming from hailstorms over the first few months of the year had topped $2.6bn .

 

When combined with the impact of Hurricane Matthew in October 2016, underwriters had hoped US D&F rates would harden, but overcapacity and fierce competition have continued to stifle rate increases.

 

There are, however, pockets of resistance emerging in the US market. Underwriting sources suggested habitational accounts - which account for an estimated $5bn-$7bn of premium in the US - are struggling to get placed due to high loss records.

 

One source said: "You could double the premium year-on-year and still be losing money."

 

Another London-based underwriter said primary habitational insurers were in a "world of pain" through a combination of locked-in low rates and severe losses.

 

Many habitational insurers are now trying to re-underwrite their portfolios, he added.

 

A similar situation has been emerging for beachfront hotels in the international D&F space, with brokers having difficulty placing the business due to poor profitability, it was suggested.

 

International D&F rates have responded to recent withdrawals and scale-backs in the London market, but the impact on pricing has been small.

 

The sense in London is that on a technical basis many carriers are loss-making on their D&F books and the market will eventually be forced to turn.

 

One underwriter said: "The best thing that can happen to the D&F market is a cat-free year. That way there will be no large losses to hide the fact the numbers really aren't good, and chief underwriting officers will have to take action." 

 

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