simon delchar - marsh global markets lisa hansford-smith - marsh insurance market update may 26...
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Simon Delchar - MARSH Global MarketsLisa Hansford-Smith - MARSH
Insurance Market Update
May 26 & 27
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Simon DelcharManaging DirectorGlobal Markets
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State of the World-wide Property Market
01 January 2005 Renewal Season - London Market
Catastrophe PerilsDespite loss activity in the USA, Asia & Europe, property rates have continued to fall in 2005 by an average of 10%
Fire PerilsPlenty of capacity & pricing variance, heavily influenced by individual territory results. Rates continuing to fall for accounts with no major loss activity by an average of 15%.
Greater reductions available if market longevity not crucial
DeductiblesStable, but can look to reduce with good loss record & information. Generally, not sufficient credit given for increased retentions.
CapacityNo shortage of capacity. Global market capacity in excess of USD 7 billion for fire; less for natural catastrophe depending on location.
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State of the World-wide Property Market12 months to the present date
Natural Disasters Losses
April 2004 - Oklahoma Hailstorms USD75-100,000,000
May/June 2004 - US Midwest Tornadoes USD500,000,000
June 2004 - Colorado Hailstorms USD625,000,000
June 2004 - Texas Severe Weather USD175,000,000
June 2004 - Asian Typhoon Mindulle USD100,000,000
July 2004 - Japan Floods USD190,000,000
August 2004 - Asian Typhoon Rananim USD2,000,000,000 (direct economic losses)
August 2004 - Caribbean/Florida Hurricane Charley USD7,600,000,000
August 2004 - Asian Typhoon Chaba USD950,000,000
August 2004 - Asian Typhoon Aere USD269,800,000 (direct economic losses)
August/September 2004 - Caribbean/Florida Hurricane Frances USD4,700,000,000
August/September 2004 - Asian Typhoon Songda USD3,000,000,000
September 2004 - Caribbean/Florida Hurricane Ivan USD11,700,000,000
September 2004 - Caribbean/Florida Hurricane Jeanne USD4,500,000,000
September 2004 - Asian Typhoon Meari USD215,000,000
October 2004 - Asian Typhoon Ma-On USD195,000,000
October 2004 - Asian Typhoon Tokage USD1,100,000,000
October 2004 - Japan Earthquake USD450,000,000
December 2004 - Indian Ocean Earthquake & Tsunami USD2.5 - 4,000,000,000
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Property Placements - Key issues
Intangible Property (data)Crucial for exposure to be evaluated and separate products/risk
transfer effected if required.
Contingent Business InterruptionSuppliers and CustomersInterdependency
Catastrophe LimitsAsia - existing operations and growth opportunities
Loss Mitigation
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The Key to Success: Strategic Planning
Quality, relevance & depth of information
Timing
Benchmarking can help validate limits, retentions and pricing
Rating tools ensure a feel for market pricing- don’t let the market dictate the pricing!
PML’s- One common standard
A clear placement plan- Target key markets with appetite and understanding of Technology
industry exposures - Geographic diversity of market to create competition
Pro-active relationship with your insurance/reinsurance panel - Mid -Term Strategic Review Meetings- Visits to key locations
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Market reform
Best terms
Split terms/ Composite pricing
Potential pitfalls:
- Who is the leader?
- Multiple agreement parties for wordings, claims and amendments
- Could lead to:delay of policy issuanceinconsistency of coverageappointment of multiple expertsperceived breach or trust
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Conclusion
Rate reductions are continuing and no sign of upturn
Information= differentiation
Relationships are important for most clients and underwriters
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Lisa Hansford-SmithFINPRO
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State of the D&O Marketplace
Companies are now tending towards purchasing Side A or Side A&B only and reducing Side C cover.
We are seeing softening premiums across all industry groups (with the exception of Pharma).
Issues such as poor financials, governance, outstanding claims are still of concern to underwriters.
We are continuing to see increasing levels of capacity – approximately USD 400 million.
Exclusions – some of the hard market exclusions are being removed such as failure to maintain insurance.
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State of the E&O MarketplaceState of the E&O Marketplace
There are several strong Technology lead Errors & Omission markets - HISCOX, AIG, Beazley, Chubb.
Premiums -5% to 10%.
Loss Experience Uncertainty of what the next high tech issue may
bring – i.e. privacy claims.
Capacity Good levels of capacity available (approx 250
million dollars).
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The State of the E&O Market
What underwriters are not writing from an E&O perspective!!
Single project cover
– Single project cover is very difficult to obtain and in most cases not cost effective.
Patent cover
– In some cases all IPR cover.
Where are underwriters being cautious
Security liability cover
Cyber and Virus cover
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State of the MarketplaceState of the Marketplace
Tech D&O and E&O StrategiesTech D&O and E&O Strategies Underwriter Information/Face to Face Meetings
Start renewals early and ensure that all information is present in submission form.
Explain/introduce CFO/CIO/GC (if possible) to demonstrate coordination, control & process
In terms of E&O coverage: Milestone management
Meet with contract managers (this is for the E&O coverage)
How does the company handle dissatisfied customers (how soon does it move beyond the project manager to a more senior level manager?)