“We should no longer be talking about a soft market”

Our latest Property Damage and Business Interruption benchmark survey confirms an argument put forward in this publication for two years – that the current benign insurance conditions should not be regarded as a ‘soft’ market. Barring some sizeable ‘Black Swan’ event they could be with us for many years.

“Unless there is a really cataclysmic loss or run of losses, we can expect continued advantageous buying conditions in 2011 and beyond,” we argued in 2010 (Airmic News December 2010, Is the soft market an urban myth?)

As it turned out 2011 put that opinion to the test. It was an extraordinarily challenging year for the re/insurance industry. Insured losses worldwide topped $100 billion, making it the second most expensive in history after 2005.

And yet our survey shows that rates did not go up in response. Of course, certain types of business did become more expensive, but were offset by those that moved downwards. In fact, if you allow for inflation, they appear to have reduced a little on average.

So what is going on? The arguments expressed in that article can be read by clicking here. In essence, we argued that the there had been a fundamental change in the way the market works.

If the world economy is set for an extended period of stagnation, then there should be lots of capital swirling around looking for a home, making it even more likely that there will be plenty of insurance capacity.

None of this makes future rate increases impossible. However, a growing number of observers believe the old cycle, where low rates were invariably ‘corrected’ by a surge in prices, to be a thing of the past.

“Unless there is a really cataclysmic loss or run of losses, we can expect continued advantageous buying conditions in 2011 and beyond”