Reinsurance rates were generally flat for loss-free programs in Portugal at the January 1, 2011 renewal. Property catastrophe and property risk pricing were stable, as was workers compensation. Motor reinsurance was down 5 percent to 10 percent year over year. Loss-affected programs experienced similar pricing behavior. Property catastrophe pricing would have fallen but for heavy rains and flooding in Madeira.
Capacity was basically unchanged year over year, though there was a small increase in catastrophe lines through reinsurers in Bermuda.
Property industrial insurance rates are down 5 percent to 10 percent year over year, with private and commercial property flat to down 5 percent for the same period. Motor insurance rates are flat to up five percent, with workers compensation posting an increase of 5 percent to 20 percent. Loss ratios for motor and workers compensation fell from the third quarter of 2009 to the third quarter of 2010 - from 76 percent to 74.8 percent for motor and from 80.1 percent to 79.4 percent for workers compensation. Property loss ratios increased from 50.9 percent to 66.3 percent during this period.
The outlook for market health and insurance pricing in 2011 reflects what was experienced in 2010. Look for a slow recovery to begin in the insurance industry, with virtually no new business. There is likely to be a need to increase primary insurance rates for some lines, particularly motor and workers compensation.
Reinsurance and primary insurance pricing remain aligned, though there is a short lapse in timing adjustment for workers compensation. Subject base exposure and premium are declining in roughly the same proportion as the global economy indicators.
Structural changes did come to workers compensation programs. Until recently, only the mathematical provision was covered. With medical expenses growing rapidly, companies are now looking to include them in reinsurance contracts.