Prediction made in Lockton Market Update, assessing global trends in key areas

Insurance broker Lockton says international casualty buyers can expect upward pricing pressure in the coming months.

Diminished capacity and financial pressures may give underwriters greater incentive to maintain pricing discipline. However, the Lockton Market Update reports that since insurance capacity has been fairly high compared to historic levels, rates have not been changing rapidly.

“The casualty market has flattened out after many years of softening rates,” said Tony Hardy of Lockton’s Global Casualty unit in London.

“The reinsurance treaties at 1 January were generally benign in terms of rates and conditions. There are signs that the renewals that occur in the middle of the year may be more difficult for buyers.”

In other lines, certain risks have already seen increases, while rate decreases may be beginning to flatten across the board.

Some of the most significant deviations by line mentioned in the Lockton Market Update include:

Financial Risks – Chris Hewitt of Lockton’s D&O team in London reports that financial firms “have to meet intensive underwriting requirements in the wake of recent shocks, including Madoff, Stanford, and, of course, the problems caused by companies’ well-publicised exposures to sub-prime loan portfolios. As a result, we are seeing more restrictive terms, lower limits, and significant premium increases ranging between 20 to 100 percent.”

Political and Credit Risk – “The market is effectively punch drunk,” observes Peter Hornsby of Lockton’s London-based Political and Credit Risk team. “Credit insurers are going into fast retreat. Clients are not only failing to secure cover against the risk of bad debt due to insolvency or protracted default of their buyers, but also for their suppliers which means they are being squeezed on two fronts. It is fair to say that underwriters in this market are not being overly responsive.”