Soft Insurance Market Forecast for 2015
At the start of a new fiscal year, reviewing insurance and other ongoing expense lines is as important as setting new revenue targets. According to research by The Precept Group Inc., the 2015 forecast for a soft insurance market means that prices will be relatively stable, and for large companies with negotiating power, perhaps even fall slightly for certain lines.
In recent decades, soft insurance markets that are tied to reinsurer and insurer profitability have generally dominated.
The overall economic climate and the prevalence of natural disasters are two of the most meaningful, leading indicators of insurance pricing trends. Whether your rate go up or down also depends on the type of business insurance coverage you need, as well as where you are located.
Fewer Catastrophes Equal More Stability
It is anticipated that excess capital and a quiet year for catastrophic losses will allow insurers to lower operating costs as a result of lower-priced reinsurance. In 2014, the total cost of insured losses resulting from natural catastrophes was $39 billion USD, which is 38 per cent lower than the 10-year average.
Looking ahead, experts foresee that insurers will be in a position to lower operating costs through lower-priced re-insurance. Armed with extra funds and hungry for growth, insurers are actively seeking new business by offering more competitive rates to consumers.
Soft Insurance Market Savings
Reinsurance companies paid out fewer, less expensive claims in 2014 and with extra capital on hand, can insure more businesses in 2015 – which increases the competition for customers. Primary insurance companies are paying lower reinsurance premiums, a savings they can pass along to consumers like you.
With a soft insurance market forecast, insurers believe they will be able to earn adequate returns and still price competitively this year. For 2015, experts predict that rate increases will happen at a slower pace for commercial insurance and auto liability insurance and rates for property insurance may potentially decline.
Property & Casualty 360 takes an in-depth look at the 2015 insurance market, opportunities and trending issues.
Sources: P&C Market Outlook 2015, page 8-9