In the primary market, rates are still declining in over-supplied sectors of commercial and mid-sized industrial liability. However, some major industrial insureds with difficult loss histories have renewed at significant premium increases or with increased self-insured retentions. Overall, however, the primary market is flat. In 2012, consolidation is likely to accelerate if price-to book ratios improve, as weaker carriers seek capital support. If this does occur, premiums will begin to increase.
Some reinsurance programs have experienced rate increases because of the late development of a limited number of significant professional liability and product liability losses written on occurrence triggers, as well as incurred but not reported (IBNR) movements on known losses under claims made.
Primary GTPL insurance rates were flat to down 5 percent - in some cases down even 20 percent on business with sustained loss ratios below 40 percent. Reinsurance GTPL rates were, however, flat to up 5 percent. This dichotomy could increase as reinsurers try to charge higher volatility loadings to off set capital costs. With Solvency II coming, capital allocation disciplines are toughening.
Per risk excess of loss working layer programs were up 5 percent - which is effectively unchanged on increasing base underlying premium. There is more pressure to increase rates at the bottom end because of concerns about changing loss frequency. High risk excess programs were flat at the January 1, 2012, reinsurance renewal. Overall, the trend is to retain more risk, either on a first-loss basis or with co-reinsurance participation. Capacity increases came in the form of new capacity and increasing appetite for regional business from several existing Continental European reinsurers. Lloyd’s, however, is cutting back.
Proportional treaty cedent risk retentions are stable, but this is the net effect of their desire to cede less profit, balanced against the attraction of capital relief from a better diversified reinsurer. As a result, some carriers are ceding more in order to achieve greater capital efficiency arbitrage. Several treaties have been under pressure to reduce ceding commissions and overrides, especially where treaty premium-to-limit ratios are weak. Capacity is stable to increasing, with London markets more willing to entertain proportional reinsurance placements than in the past.