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US casualty a buyers’ market: Marsh

The US casualty insurance has continued to soften in the second quarter of 2015, with previously challenging risks increasingly easy to place, according to Steve Kempsey of Marsh.

Kempsey, who is the broker's US casualty practice leader, said that market conditions are being driven by the level of capital and macroeconomic factors as growth picks up.

"It's mainly because of an abundance of capital that's translated to significant competition and prompted insurers to take early and aggressive steps to retain existing business and potentially avoid the marketing of programmes," he said.

And the executive also highlighted that an increase in buyers' exposures in the form of payroll, revenue and autos were helping maintain a softening market.

"Carriers are more willing to grant rate decreases because the effect on actual premium dollars is mitigated by the exposure increase," Kempsey explained.

This created a positive environment for buyers, said the broker, with other year-on-year improvements including multi-year guarantees and concessions on policy language.

As competition increases, insurers are also becoming more flexible about collateral requirements as they seek to win and retain business, with some carriers offering to accept some required collateral in the form of surety bonds.

Meanwhile, companies considered good risks have been able in some cases to secure long-term collateral deals, Dempsey said.

The broker also highlighted a change in approach from underwriters to what were previously perceived as more challenging risks to place.

In recent years there had been a divergence in the US casualty sector between good risks with favourable loss experience or a desired risk profile, which were able to get favourable terms from the market, and those higher hazard or distressed risks that were not rewarded with the same terms.

"The focus on attractive business continues, but at the same time the pressure on insurers continues to grow," Kempsey observed.

"With abundant capital to use for growth, casualty insurers are more aggressively seeking even challenged business."

He suggested that many insurers are trying to hold onto less profitable accounts in order to maintain premium volume, while some are even looking to write some of the more challenged risks rather than face extremely heavy competition for the more attractive business.

"So while the market for more difficult risks is more challenging, we are seeing more predictability and flexibility at renewal even for these accounts," Kempsey continued.

The executive noted that New York construction and long haul trucking continued to be among the more challenged exposures in the market. He added that while some companies still face a difficult market, there seem to be fewer of these accounts.

On specific lines of business, the broker said that workers' comp continues to be "relatively soft" with some pockets that remain challenging, including sizeable California exposures and large employee concentrations in large cities.

General liability also remained positive for buyers, with fewer clients facing rate increases in the first half of 2015, he suggested.

However, adverse developments - including recent $100mn jury verdicts - have continued to challenge profitability in auto liability, which has translated into less flexibility in pricing, terms and conditions for insureds, especially in the excess space.

"Even though insurers are having it difficult they do remain focused on trying to renew their auto books and grow them along with accompanying lines of coverage," Kempsey said.

But he noted that in auto liability excess, carriers are "revisiting their appetite", especially for larger fleets.

Meanwhile, in international casualty and medical malpractice buyers continue to enjoy a "very competitive" landscape.

Market conditions for owner and contractor controlled insurance programmes are "competitive and aggressive" said Kempsey.

"Insurers have invested into the construction industry

and will need to continue to compete for and write business to justify that investment.

"This applies to not only primary markets but also to umbrella and excess markets, which continue to be extremely aggressive in this space, with an oversupply of capacity driving significant positive results for our clients," he continued.

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