Willis

NEW YORK, May 2, 2011 – First quarter catastrophe losses, including the earthquake and tsunami in Japan, coupled with a revised catastrophe model are adding upward pressure to the soft property insurance market, according to Willis Group Holdings (NYSE: WSH), the global insurance broker. During the second quarter, rates for North American catastrophe-exposed property risks are expected to increase up to 5%, while non-catastrophe exposed property insurance buyers could still experience rate declines, Willis said in its spring update to its 2011 Marketplace Realities and Risk Management Solutions report, published today.

The report, available here, offers commentary and analysis on the North American insurance marketplace for every major line and select industry sectors.

Abundant capacity is helping to keep other commercial lines mostly stable, and first quarter renewals continued to experience soft market conditions. However, additional catastrophe losses could impact pricing in other lines, and the market is in transition as we head into the U.S. Atlantic Hurricane season. Willis is urging North American buyers to review insurance programs, consider renewal strategies and consider options for any unknowns that lie ahead.

In introductory comments, Todd Jones, President of Willis North America, said, “The Property market is shifting, especially for catastrophic risks. The overall marketplace, however, appears to be stable, and while the softening may slow, no major reversals so far are detected. This speaks volumes about the resiliency of our industry.”

Jones warned, however, that should predictions of an active Atlantic hurricane season come true, the market could turn for other lines as well. “This year, a big hit to the world’s carriers could put us over the tipping point.”

Subtitled “Ongoing Opportunities,” the update builds on the 2011 report published last fall. In addition to articles on Property, Casualty, Workers’ Compensation, Employee Benefits and all Executive Risks lines, the publication includes pieces on key specialty lines: Aerospace, Cyber Risks, Construction, Energy, Environmental, Health Care Professional, Kidnap & Ransom, Marine, Political Risk, Surety, Terrorism and Trade Credit.

Highlights from the report include:

• Property: The Japan earthquake and tsunami, coupled with catastrophe modeling firm Risk Management Solutions’ (RMS) updated hurricane model version 11.0 will most likely bring the soft market to a close and we forecast a stabilization of rates for Q2. RMS 11.0 is producing some dramatic increases in the modeled loss estimates in some tier-two wind zones, up to 100% in some cases. Catastrophe exposed property accounts could experience rate increases of 5%. Non-catastrophe exposed property risks may be able to continue to find reductions of 5% -10%.
• Casualty: Primary rates are leveling, though carriers still present ample capacity and appetite for risk. Larger auto fleets may begin to see less favorable Auto Liability rates. The Excess/Umbrella casualty liability market is less soft. Carriers are seeking flat renewals or small rate increases on rising exposures.
• Workers’ Compensation: The soft Workers’ Compensation market is expected to continue into 2011 but flatten by Q4. This year, several states are filing for rate increases including California, Florida and New York. Collateral requirements remain a challenge for most insureds, often preventing buyers from taking full advantage of conditions.
• Directors & Officers: Rate reductions remain common, though more frequently in single digits. Dramatic changes to coverage is creating a new landscape and many enhancements will be a boon to covered directors and officers.
• Employee Benefits: Rates are expected to rise 12% -14%, with 2% -4% of that attributable to coverage changes mandate in health care reform. Given the higher costs that are expected due to health care reform, buyers are seeking more aggressive cost containment strategies.

The publication, which is updated semi-annually, is available free of charge on the Publications page of the Willis website http://www.willis.com/What_We Think/Publications/.

Willis Group Holdings is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers 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 17,000 employees serving clients in virtually every part of the world. Additional information on Willis may be found at www.willis.com.