Signs of potential firming beginning to appear in market segments

Overall Canadian market conditions remain favorable across most lines through the end of the second quarter of 2011, but signs of a firming market are beginning to appear in segments of the marketplace, according to a new report published today by Marsh.



The majority of commercial property, casualty, and financial and professional insurance buyers are not experiencing significant rate increases as capacity remains abundant, according to Marsh’s 2011 Canada Insurance Market Midyear Update.



However, property insurance rates are increasing in individual sectors, such as energy and mining, and 2011 catastrophe losses could further impact rates for some buyers. During the second quarter, the Canadian market suffered its second largest catastrophe loss ever as a result of the Slave Lake wildfires in Alberta, claims for which could well exceed $700 million.



“It is still too early to tell if the second half of the year will bring any overall increases to commercial insurance rates in Canada,” said Alan Garner, President and CEO of Marsh Canada Limited. “However, for accounts with U.S. and global catastrophe exposure, we anticipate increases of 10 to 15 percent on the U.S. exposure portion of the risk.



“Similarly, companies with significant U.S. liability exposures will see some rate increases. Marsh expects that pure Canadian commercial accounts will see rates remain flat well into the third quarter of 2011 and possibly beyond.”



Marsh’s midyear update is based on data from Marsh’s Global Benchmarking Portal and reflects transactions brokered by Marsh through early July 2011. Marsh’s benchmarking data provides clients with the most current and relevant information available in the insurance brokerage industry to make informed risk financing and budgeting decisions.



Among the report’s other findings:

• Following some significant losses early in the year, most upstream energy exploration and production property risks have been subject to rate increases of between 5 and 10 percent. However, control of well and general liability rates remain fairly flat.
• Rates are also beginning to rise in the mining sector, particularly for Canadian companies with operations outside of Canada and for those with catastrophe exposures. Marsh anticipates overall rate increases of 5 to 10 percent in the second half of the year, with the potential for increase of as much as 20 percent for insureds with catastrophe exposures and poor loss records.
• Underwriters are starting to look more carefully at contingent business interruption (CBI) and contingent exposures following the Alberta wildfires, requiring more information from insureds before offering such coverage.
• Buyers of financial and professional insurance, including directors and officers liability, are benefiting from broader coverage options as insurers seek to expand their market share. Several insurers have developed new, broader wordings over the past 12 months, while others are seeking to compete by providing a broad suite of enhancements by endorsement.