Despite US$100 million of insured losses in 2008, reinsurance prices fall 15-22%

Insurers have absorbed losses of more than US$100 million due to 15 events this year, Robert F. Howe, global leader of property operations for Marsh Inc., noted during a panel discussion in New York on May 30. Total aggregate losses to date this year have exceeded US$5 billion due to flooding, fires, tornados and other events, Howe said. Despite these events, reinsurance pricing has decreased 15-22% on a risk-adjusted basis and capacity has increased about 32%, Kevin Stokes, leader of Guy Carpenter’s global property specialty practice, as well as its Florida operating committee, noted. Companies with detailed disaster management plans in place recover sooner both financially and operationally than those that fail to plan, Ken Giambagno, global leader of Marsh Risk Consulting’s forensic accounting and claims service practice, said. In addition, businesses should determine suppliers’ and customers’ disaster management plans, Giambagno said. He cited businesses in the United States that have operations affected due to the recent earthquake in China because they cannot receive shipments from their suppliers in that area. Commercial property catastrophe insurance pricing has decreased from the 2006 and 2007 levels, and the supply of hurricane insurance for businesses has increased this year, Howe said. “Market rates are below pre-Hurricane Katrina levels and, in some cases, below pre-September 11th levels,” he noted in the release. Thus far there is an 11% to 12% median rate reduction. Panelists recommended locking in pricing now, due to the shifting supply-demand characteristics.