LONDON: Competition in the global insurance market is driving commercial rates down by as much as 15 percent, senior industry participants said on Thursday, as some look to new products such as cyber insurance to boost revenues.
Low yields in major markets have encouraged a move away from traditional insurance and towards insurance-linked securities such as catastrophe bonds, which offer a high return.
Some hedge funds have also started offering reinsurance to share the insurance burden of hurricanes and other costly natural disasters, and their aggressive approach has stolen business from traditional players.
A lack of natural disasters in recent years has also reduced global demand for insurance to protect property.
“This is a soft rate environment, with an average 10-15 percent decrease across the board,” Dominic Burke, chief executive of broker Jardine Lloyd Thompson told a conference. “It’s a good time to be a buyer of insurance.”
Many companies renew insurance policies in the fourth quarter while reinsurance renewals are concentrated in January.
Burke said even the aviation insurance market has seen price increases of only around 13 percent during the current renewal round, despite significant losses this year such as the downing of a Malaysian Airlines plane over Ukraine.
Darren Redhead, chief executive of specialist insurance fund manager Kinesis Capital Management, said alternative insurance products had sliced 15-20 percent from the profits of traditional players in the property catastrophe reinsurance market.
Reuters
