Connect to Real Estate

This was as a result of a combination of factors:

- the market having been "soft" for several years, resulting in a downward trend in rating over the course of that time;

- a reduction in reserve levels available to release, to boost profitability;

- the potential impact of recessionary linked claims, both actual and fraudulent;

- increased reinsurance costs

- the inflationary nature of claims costs and settlements;

- a lack of investment income and low interest rates;

- as a result of the previous two points, the need to underwrite business with a greater emphasis on profitability, rather than market share.

However, the reality during 2009 was that competition for business amongst insurers remained fierce, with some seemingly operating a "dual pricing" system of underwriting, whereby reduced rating was offered to secure new business, with attempts being made to achieve targeted rate increases on existing business.

Whilst potentially beneficial to clients in the short term, such a strategy adds obvious friction and instability into the equation when the business then comes round to renew the following year.

The latter half of 2009 saw an even greater drive by insurers to secure business, both new and existing, driven largely by poor financial results for the first half of the year.

So what lies in store in 2010?

Essentially, the same issues described above still exist and so must be taken into account when attempting to plot the course of rates during the next 12 months...

Download the 'Market Commentary 2010' newsletter as a PDF(1.58kb) by clicking here