Progressive Management Associates

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The combined forces of alternative capital resources and overabundance in the property/casualty market have ushered in a surprisingly strong soft market cycle, and a recent report from Willis North America anticipates widespread rate decreases for the following year.

However, in spite of this environment, the risk advisory and brokerage firm has identified five P/C lines it expects to buck the trends in its “Marketplace Realities 2016” report, with cyber leading the way and effecting other lines in its wake.

“There is no escaping cyber exposure,” said Matt Keeping, chief broking officer with Willis. “Cyber also impacts errors and omissions, as breach incidents are often covered in part by E&O policies; this was the only line that moved from the ‘flat’ category into ‘expecting increases’ category since the spring.”

In full, the five lines expected to carry rate increases in 2016 include:

1. Cyber – Non-POS Retail and Large Healthcare flat to +15% and POS Retail and Large Healthcare +1-% to 150%
Large losses in the retail and healthcare sectors have caused a few markets to stop writing large accounts and others to increase their premiums significantly. Underwriting requirements also continue to rise, and carriers are becoming more selective about the risks they take on.

2. Employee Benefits – Self Insured +4% to +5% and Fully Insured +7.5% to +8.5%
New prescription drugs in the biologic and biosimilar categories are contributing to a rise in prescription costs, pushing employee benefits to higher costs. The industry is also continuing to embrace wellness programs, but is moving on from a return-on-investment focus on medical costs to a value-on investment focus on a broader set of criteria, according to Willis.

3. Errors & Omissions – Self Insured +4% to +5% and Fully Insured +7.5% to 8.5%
Rising claims are expected to cause slight increases for many buyers in the month ahead, though competition from new carriers and traditional carriers seeking to expand market share is limiting upward pressure on rates to low single digits or even flat renewals. Willis expects industries most at risk for large claims and litigation to see the most upward pressure on rates.

4. Fidelity – Flat to +5%
Several of the largest fidelity markets lost money or earned only marginal profits last year, resulting in large losses. However, the balance of the market has achieved favorable results and large increases are not expected. Employee theft remains the leading source for claims under both commercial crime and financial institution bonds, with a particular rise in electronically enabled theft.

5. Kidnap and Ransom – Flat to +5%
Kidnapping risk for employees is up as political tensions escalate, leading to potential increases for buyers with overseas exposures – particularly in Mexico, Yemen, Libya, Syria and Lebanon. Closer to home, however, buyers with exposures in the US can actually expect flat renewals and even potential rate decreases up to 5%.

The Willis report also included a list of lines predicted to deliver a mix of small increases and decreases. These include: workers’ compensation, auto, construction, directors and officers, employment practices liability, environmental and fiduciary.
Posted 12:49 PM

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