Casualty Insurance Market Shows Signs of Stress

Lockton Market Update shows carriers depleting reserves, but pricing, for now, still favors buyers

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Nov 16, 2011, 08:30 ET

KANSAS CITY, Mo. and LONDON, Nov. 16, 2011 /PRNewswire/ -- The latest Lockton Market Update indicates increasing signs of pricing pressure for casualty and liability insurance, but the overall pricing environment for the moment favors insurance buyers.

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"It would certainly be premature to discern any clear sign of a hardening market, but 2011 could yet end up looking like a year of transition for the casualty market," says Tony Hardy, leader of Lockton's Global Casualty team in London, in the report. "Buyers would be well-advised to engage with their markets early in the renewal process to avoid any unpleasant surprises on rates or retentions, particularly if their claims experience has deteriorated over the past few years."

The Lockton Market Update notes that many carriers released excess reserves in 2009 and 2010 that improved their current year net income and combined ratios. For several carriers, the reserve releases accounted for 10-20 percent of the carrier earnings and up to 4 points of the overall combined ratio.

"In conversations with several carriers and other sources, the industry has lost its reserving buffer, and further releases are not expected to be significant, if they occur at all," says Mark Moreland, Director of Risk Management for Lockton in Kansas City, in his commentary on the casualty insurance market. "Recognizing deteriorating combined ratios without the support of further reserve releases, several carriers are considering reducing their market share and attempting to achieve small, single-digit rate increases at renewal. This may force companies to market their deal to other overcapitalized carriers eager to generate new business."

The Lockton Market Update is available free. The newest update includes reports on 17 insurance and employee benefits markets globally.

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More than 4,100 professionals at Lockton provide more than 15,000 clients around the world with insurance, benefits, and risk management services, offering an uncommon level of client service. From its founding in 1966 in Kansas City, Missouri, Lockton has grown to become the largest privately held insurance broker in the world and 9th largest overall. Independent researcher Greenwich Associates awarded Lockton its 2011 Service Excellence Award for risk management for large companies. For three consecutive years, Business Insurance has recognized Lockton as a "Best Place to Work in Insurance."

SOURCE Lockton