Willis: Financial Institutions Insurance Market Continues to Harden
--Average Premium Increase of 15 Percent in Second Quarter of 2009--
London, UK, August 4, 2009 – Financial institutions faced an average premium hike
of 15 percent in the second quarter of 2009, as insurers seek to make up for
underwriting losses resulting from a deluge of credit crunch-related Professional
Indemnity and Directors and Officers’ claims, according to a new report from Willis
Group Holdings (NYSE: WSH), the global insurance broker.
Premium increases can be dramatically higher, the report said, in cases where
underwriters have concerns over exposure or where financial institutions have
experienced significant growth.
Willis’ second-quarter Financial Institutions (FI) market update, published by FINEX
Global, Willis’ London-based Financial, Executive Risk and Professional Liability
business, said that there had been a “notable hardening” of the FI insurance market
in the first half of 2009, with the trend set to continue for the rest of the year.
The report, which represents the opinions of 20 leading FI insurers in the London
market, noted that, for some financial institutions insurers, the claims they have paid
in 2007 and 2008 have exceeded the premiums received, hence the push for rate
increases in early 2009.
Willis noted that underwriters were taking three different approaches towards
mitigating the effects of the financial turmoil on their business, namely:
Increasing premium: Underwriters are looking to enforce premium increases across
their entire portfolio regardless of risk profile and are prepared to “walk away” from
unprofitable risks.
Reducing exposure: In a very difficult marketplace it is common for insurers to
reduce their overall participation on a programme.
Restricting policy coverage: Underwriters are examining existing wordings in detail
with a view to restricting various areas.
Commenting on the findings, Duncan Holmes, Managing Director of FINEX
Professional Risks, said, “Due to the magnitude and long-tail nature of the type of
claims financial institutions insurers are facing and the continuing climate of
economic uncertainty, we expect to see the market hardening further. That being
said, we have not seen a widespread withdrawal of insurers from this sector and
there is still a surplus of capacity for certain risks. In these conditions there are still
opportunities for specialist FI brokers like Willis to drive competition and dilute
premium increases. While negotiations are getting more difficult, the market is still
flexible.”
Financial institutions are likely to face increased due diligence from underwriters, the
report noted, and as a result, Willis is advising clients to begin the renewal process
early and to be pro-active in responding to underwriter queries, to secure coverage at
the best possible terms.
Willis Group Holdings Limited is a leading global insurance broker, developing and
delivering professional insurance, reinsurance, risk management, financial and
human resource consulting and actuarial services to corporations, public entities and
institutions around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 20,000 Associates serving clients in
some 190 countries. Additional information on Willis may be found at www.willis.com.
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Note to Editor: Click here to read the full Willis FI Index.