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Competitive pressures weigh on US umbrella and excess liability rates

Competitive pressures have spread to the US casualty market according to broking heavyweight Marsh, after average rate increases for umbrella and excess liability lines continued to moderate in the first quarter.

In a report published last week, Marsh noted that average renewal rate gains for these two segments fell to 3.1 percent in Q1 2014 - the second-lowest rate of increase in nearly two years.

This compares to 3.2 percent in the prior quarter and a high of 5.2 percent in Q2 2013.

The deceleration comes despite ongoing concern from underwriters over possible large casualty losses in areas such as auto and product liability.

Marsh ascribed the market dynamics to the entrance of new carriers into umbrella and excess liability in the last few years.

"While in the past, incumbent insurers focused on achieving rate increases, insurers are now seeking to retain existing business in this more competitive marketplace."

Rate changes for most insureds hovered around the low single-digit level, with significant variation according to individual client characteristics, industry type, loss history and other risk factors.

The broker said that around half its clients that renewed their umbrella and excess liability programmes in the first quarter of 2014 experienced rate increases, in line with recent quarters.

However, the proportion of insureds achieving rate decreases in the period also increased, rising to 24 percent in Q1 2014 compared to 16 percent in Q3 2012, with some outliers achieving rate declines of as much as 20 percent.

Marsh said the industries most likely to see increases included chemical, energy, life sciences, mining and product manufacturing - largely as a result of recent loss experience for underwriters in those sectors, driven by explosions, pollution and class-action litigation.

These findings are supported by the latest market barometer from the Council of Insurance Agents & Brokers (CIAB).

Late last month, the survey revealed that rate increases had slowed down to 1.7 percent for umbrella business in Q1 2014, versus 2.4 percent in Q4 2013 and 4.7 percent in Q1 2013.

This came as the number of CIAB survey participants who said that rates were down 1 to 10 percent quadrupled to 17 percent quarter-on-quarter. However, this was still outweighed by the 43 percent who reported rate increases of 1 to 20 percent.

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