[January 30, 2013]

Further Firming Expected in US Commercial Insurance Market in 2013: Marsh

US commercial insurance rates are expected to continue firming in many lines of business and industry sectors in 2013 as above average losses, subdued investment returns, and receding reserve releases impact insurers, according to a comprehensive report published today by Marsh. However, traditional signs of a conventional hard market are not evident as price increases are not uniform, capacity is plentiful, and competition among insurers remains intense, Marsh said in its US Insurance Market Report 2013.

Superstorm Sandy's effect on the property insurance market will likely temper what had been a generally improving rate environment for property insurance buyers in late 2012, Marsh said. Though the full effects of the storm are still being determined, decreases in property insurance pricing generally are unlikely in early 2013.

Casualty insurance markets remain in a state of transition entering 2013, though pricing trends will likely be felt unevenly across various lines of business and client demographics. Rates for financial and professional insurance - including directors and officers liability (D&O), commercial errors and omissions (E&O), and cyber insurance - are also expected to generally increase in 2013.

"Although Superstorm Sandy will rank as one of the costliest storms in US history, it is not forcing a rapid hardening of the overall market as insurers' capital positions were strong enough to weather the storm," said David Bidmead, Marsh's US CEO. "But the storm has prompted underwriters to seek clarification of certain definitions and other language in property policies. In the Northeast and other regions that they did not previously perceive to be catastrophe-exposed, property insurers are also reconsidering their underwriting approach and seeking higher rates and tighter terms and conditions.

"Many of our clients will face challenging renewals across several lines and industries in 2013, as insurers continue to adjust their pricing and coverage offered to maintain profitability. Clients that effectively differentiate themselves from their peers by providing complete underwriting submissions with accurate and high-quality dat will be best positioned to secure more favorable terms, conditions, and pricing where possible."

Marsh's annual US Insurance Market Report provides detailed information on commercial insurance market trends and risk issues for all major classes of business and more than two dozen industry and specialty lines. Other major findings from the report include:

• Insureds with significant catastrophe exposures renewing programs in the fourth quarter of 2012 typically saw property rate increases of 5% to 15%.
• The general liability insurance market was generally stable in 2012, with some moderate firming. Rates at renewal in the fourth quarter typically ranged from 5% decreases to 5% increases.
• Workers' compensation rates generally renewed in the range of 5% decreases to 5% increases in the fourth quarter, with rates generally expected to increase more in 2013.
• After a decade of steadily declining rates, the D&O insurance market entered a state of transition in the second quarter of 2012. Pricing at renewal in the fourth quarter was typically flat to up 10% for publicly traded companies and flat to up 15% for private companies. Many insurers appear likely to continue seeking rate increases in 2013.
• Driven primarily by an increase in frequency and severity of claims, commercial E&O and cyber insurance rates began trending upward in 2012. Rates for both lines were typically flat to up 5% in the fourth quarter and are generally expected to continue to climb in 2013.
• Although conditions in the political risk market remained generally stable, pricing increased in some countries in the Middle East and North Africa at the end of 2012; this trend appears likely to continue in 2013. Conditions in the US trade credit insurance market are expected to continue to favor insureds despite concern about the European sovereign debt crisis and other global events.

About Marsh

Marsh, a global leader in insurance broking and risk management, teams with its clients to define, design, and deliver innovative industry-specific solutions that help them protect their future and thrive. It has approximately 26,000 colleagues who collaborate to provide advice and transactional capabilities to clients in over 100 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With over 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; Mercer, a global leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a global leader in management consulting. Follow Marsh on Twitter (News - Alert) @Marsh_Inc.

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