MARKET PERSPECTIVE EUROPE, MIDDLE EAST AND AFRICA EMEA INSURANCE

EUROPE, MIDDLE EAST AND AFRICA (EMEA) INSURANCE MARKET REPORT 2013
FEBRUARY 2013
Marsh • 1
FOREWORD Superstorm Sandy was the catastrophic event of 2012. It caused significant economic damage that is still being felt in the Northeastern United States, along with 125 US fatalities and more than 70 in the Caribbean. Insured losses are estimated to be in the region of US$25 billion to US$30 billion. Against this backdrop of devastation to life and property, however, has been the strength of human spirit and resilience of the people. For its part, the insurance market is proving robust to weather yet another major storm, with the impact on rates so far localised. In response, the world’s insurance industry is learning lessons on how to deal with the growing risks produced by our Earth’s increasingly volatile climate.
We must all learn to adapt to the impact of climate change. Last year, Europe, Middle East, and Africa (EMEA) faced its own bout of severe weather: the Met Office has announced that 2012 was the UK’s second wettest year on record, with the resulting floods killing nine people and causing damage in excess of £1 billion; in Italy, Venice’s acqua alta (high water) was the sixth-worst since records began in 1872; heavy snow across central and Eastern Europe wreaked havoc, particularly in Bulgaria and Romania; and in South Africa, more than 100 thatched homes were damaged or destroyed at the coastal holiday resort of St Francis Bay.
The rain has slowed but the bank balances of many European nations remain under water. The protracted sovereign debt crisis continues to weigh on economic growth across the region and throughout the rest of the world. Political risk has become a key consideration for anyone doing business in Europe’s most indebted nations, where we have seen sporadic violence on the streets against austerity measures.
Regulations across the region are bringing about additional complications for companies and the insurance industry is responding. For example, the EU’s Gender Directive, which prohibits the use of gender as a criterion in the calculation of insurance premiums, has impacted motor insurers; while the EU’s Directive on Environmental Liability, though in different stages of implementation across the 27 member states, is resulting in increased demand for environmental coverage.
The big concern is that future simultaneous shocks to both the global economy and the environment could trigger the “perfect global storm,” with potentially insurmountable consequences. This is a key conclusion of the World Economic Forum’s Global Risks 2013 report, of which Marsh & McLennan Companies is a partner. In responding to these challenges, Marsh and the insurance industry are busy coming up with innovative solutions to guard against disruptions to property, trade, and the environment — the building blocks of wealth.
A stalwart against familiar risks, the insurance industry is also at the vanguard, facing up to modern threats. In our networked world, cyber risks are growing apace and insurance will have an increasing role to play in managing these and other emerging risks. Demand for cyber risk insurance is growing across EMEA.
Although trials and tribulations make the best headlines, for most EMEA clients the insurance market has remained broadly flat over the last six months of 2012, and this is expected to continue in 2013; despite pockets of rate increases, clients with attractive risks and good loss histories generally have been able to secure rate reductions, which will remain the case this year. The capacity of the insurance industry to absorb the catastrophes of 2011 (Japan and New Zealand) and 2012 is proof of its resilience.
We thank all of our colleagues for their efforts on behalf of our clients and for their contributions to the EMEA Insurance Market Report 2013. We offer it to you with our compliments and invite you to contact Marsh to discuss this report in greater depth. As is the case with all we do, this report is part of our commitment to helping your business thrive.
David Batchelor President, Marsh International
2 • Insurance Market Report 2013
EXECUTIVE SUMMARY
RESPONDING TO A FINANCIAL CRISIS
• Many insurers believe the current trading environment is the new normal — where the credit cycle fluctuates more, and the time between financial crises is reduced.
• Concern continues in Europe around Greece, Italy, Portugal, Spain, and Ireland. There is a huge and increasing interest in trade credit insurance, and insurers will still compete for quality new business.
• Greece’s acute recession could see rate reductions on property insurance of up to 30%. In these tough economic times, all insureds are looking for ways to reduce their insurance costs: revenues have shrunk, asset values have depreciated, and preferred deductibles have increased. These trends are expected to continue in 2013.
• Greece’s unfavourable financial situation over the last two years has pushed motor insurers to build new, simpler products with lower premiums and lower commissions for intermediaries. Directors and officers (D&O) policies are increasingly necessary and the demand has increased due to mergers and acquisitions, combined with the tough measures and decisions directors and officers are being forced to take to keep companies economically viable.
• UK financial institutions coverage remains broad after its successful expansion over recent years. Claims activity continues to increase with notable market events such as the Libor scandal and payment protection insurance (PPI) mis-selling. Insurers view 2013 with caution, due to weak economic data and continued euro zone concerns.
• In the UK, flat premiums are being achieved for small and midsize financial institutions because of excess market capacity. Larger clients that buy significant insurance limits have less flexibility in relation to market competition and are therefore seeing single-figure premium increases. International banks may see larger increases, particularly in relation to professional indemnity (PI) insurance, because of insurers’ caution regarding banks’ current profiles. Clients with adverse loss records or increased risk factors may see premium increases above 10%.
EVENTS • It remains to be seen whether Superstorm Sandy will have a significant negative impact on international business in 2013.
• In the UK, the catastrophe-exposed (CAT) market is still seeing rates increase slightly, although until Superstorm Sandy, 2012 had been a quiet year. Non-CAT rates are still reducing, often to offset CAT increases, reflecting the capacity in the market.
• Northern Italy’s 2012 earthquake increased rates for both CAT and non-CAT property risks. There has also been a change in programme design and offers often include different conditions: higher deductibles, self-insured retention instead of deductibles, and lower limits.
• Loss experiences in Japan and Thailand have led to major insurers trying to increase their property damage rates in Sweden.
• Motor rates have been pushed up in Namibia — the 2011 Japanese tsunami has continued to weaken the supply chain for the delivery of auto parts and the cost of repairs for more sophisticated vehicles has risen.
DIRECTING THE ENVIRONMENT • On the back of mounting legislation and increasing claims, demand is growing across the globe for environmental cover. More of the same is expected in 2013.
• The EU Directive (2004/35/EC) on environmental liability is in different stages of implementation in the 27 member states. It is increasing risk awareness and demand for coverage. Alongside the provision of underwriting capacity in this market, which has grown around 50% in the last three to four years, 10% and 25% increases have been seen in country-specific enquiries around operational risks in the last 12 months.
• To comply with local environmental regulations, multinational buyers need to know the timing and degree of the directive’s implementation in all the countries where they operate — many demand some sort of financial security or collateral, often acceptable in the form of an insurance policy.
Marsh • 3
• It is now mandatory in the Czech Republic for companies to be insured against the prevention and remedying of environmental damage.
• Environmental pollution insurance is a new line of insurance in Slovakia. Companies that might cause environmental damage are obliged to take out financial coverage against their liability for environmental damage, including expenditures for remediation activities, and take measures to make good the environmental loss or damage.
• The environmental impairment liability insurance market in the UK has become highly competitive with new market entrants and higher demands for the commercial underwriting of risks. Coverage for portfolios of properties under ownership or management has become more commonplace and environmental risk insurance is being considered by many business sectors.
TAX AND REGULATIONS • On 1 January 2013, the Netherlands’ insurance tax increased from 9.7% to 21%. This will cause a substantial increase in the cost of insurance.
• India’s Insurance Laws (Amendment) Bill, which proposes raising the foreign direct investment cap in the sector to 49% from the current ceiling of 26%, will be tabled in parliament. This would lead to greater underwriting capability within the Indian insurance market.
• Czech insurance companies will likely increase rates in car insurance for renewals in 2013, reacting to the anti-discriminatory clause following the EU Gender Directive (2001/113/ES).
• Following South Africa, Namibia’s New Financial Institutions and Markets Bill (FINBILL) will probably see market consolidation as smaller independents are sold to big broking houses.
• In the UK, financial institutions are conscious of the increasingly aggressive nature of regulatory supervision and incidence of investigations. More regulatory fines are being seen, and there is an increased focus upon individual management responsibility. There are concerns over increasing loss frequency and claims from the global financial crisis period coming through to payment, which will add to the pressure for premium increases.
CAPTIVES • The captive market is expected to continue to grow in 2013, as it has done for the past 15 years, although there will be divergent growth rates for different domiciles.
• In the EU, the growth of captives has been less pronounced than in the US because of uncertainty
relating to Solvency II legislation, with potential captive owners adopting a wait-and-see approach before taking the step towards incorporation. This trend is expected to continue through 2013, following deferral of the implementation date for the new legislation. This may create opportunities for those domiciles that have cell legislation in place, as owners look to avoid the initial costs of capitalisation by accessing the capital within a cell structure.
BUILDING FOR GROWTH • A lot of construction is taking place in Oman this year, particularly in Duqm, a strategic port town between Muscat and Salalah. Many insurance programmes could be principal-controlled, and contractors will be required to carry third party liability (TPL) insurance. Coupled with Petroleum Development Oman’s (PDO) ambitious plans in 2013, there could be a spurt in TPL insurance.
• The Ugandan insurance industry continues to grow at an average 20% per annum, attracting new entrants, mainly from neighbouring Kenya. The recent discovery of oil reserves is expected to boost the industry. In preparation, insurers are in the process of setting up an oil insurance pool to which all are expected to subscribe.
• Qatar’s construction industry is witnessing a large number of new companies starting operations — all have an eye on FIFA World Cup 2022 projects. This segment should be a key driver for insurance business in the forthcoming years.
LEADING ON CYBER • Data breaches and other cyber and privacy breach incidents are rising with exposures often reaching up to the boardroom. While there is no silver bullet, privacy and computer security insurance solutions are available to fill some of the gaps around direct loss, business interruption, extra expense, and liability.
• A rise in cyber crime and ATM card fraud has pushed up rates for financial institutions insurance by up to 10%. It is expected that this will continue in the coming year.
• In France, cyber risk insurance is the buzz of the market and more clients are now considering getting insured against such risks. Also, cyber coverage is the most significant insurance innovation in Belgium.
• More cyber-related products are hitting the market in Sweden, with new products designed to cover growing risks. It is also a growing insurance line in Germany, where additional insurers and enhanced wording are expected in 2013.
INSURANCE MARKETS BY COUNTRY
INSURANCE MARKET CONDITIONS General Liability
Rates: Decrease 0% to 10%
Austria’s general liability market is still soft, and for the first quarter of 2013 rates generally may decrease by 10% because of strong competition between the major insurers. Cyber insurance is a new, dynamic risk where development is expected.
Motor/Auto
Rates: Increase 0% to 10%
In 2013, the motor market in Austria is likely to become firm. Among other things, this will be caused by the increasing costs for car repair.
Property: Catastrophe (CAT) Exposed
Property: Non-CAT Exposed
Rates: Stable -5% to +5%
After years in a soft market, CAT and non-CAT exposed property risks will remain stable upon renewal. Also, most insurers will invest their capacities more carefully, particularly for CAT-exposed risks.
Environmental
With the majority of environmental risks typically included in public and product liability cover, and no specific standalone environmental market, existing rates are expected to remain stable.
Directors and Officers (D&O)
After years of decreasing premiums there is a slight suggestion that rates will become more stable in 2013. Nevertheless, it remains a very competitive market due to the large capacity, so little change is expected.
Financial Institutions
Premiums may increase by up to 10%, as financial institutions come under even greater scrutiny as a result of the financial crisis.
Professional Liability
Insurers are covering risks for competitive rates and this is expected to continue in 2013.
Marine Cargo
In the last few years there has been little mush development in this market. In 2013, Marine cargo rates are expected to remain stable.
RISK TRENDS
MARKET TRENDS
Competition has increased following the entry of new insurers into Austria’s insurance market. In consequence, more competitive rates are becoming available — particularly in liability covers.
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BAHRAIN INSURANCE MARKET CONDITIONS
Increasing competition is generally keeping rates stable.
Motor/Auto
The rate for third party liability (TPL) insurance is fixed by the government in Bahrain and is mandatory. Fully comprehensive insurance cover is not taken by many clients due to bad experiences in the past with the payment of claims. Rates are expected to remain stable.
Rates are expected to be cut at renewal, as more insurers enter the property insurance market, and current insurers try to keep their market share.
Employee Benefits: Health
Employee Benefits: Life
Employee Benefits: Accident and Health
Demand is increasing dramatically for all types of employee benefits insurance, and rates are expected to increase by up to 20% in some cases.
RISK TRENDS
MARKET TRENDS
The recent civil unrest in Bahrain has not had a significant impact upon the bottom line of most businesses, although the clashes have had a negative effect on the growth of trade and has increased business uncertainty for employers and employees.
Clients are seeking innovative and cost-efficient political risk solutions, such as business interruption insurance in cases of terrorism. Sabotage and terrorism (S&T), riot, strike and malicious damage (RSMD), and medical insurance are expected to be of interest in 2013.
The fierce competition between Bahrain’s 22 insurance companies and 33 brokers is putting pressure on rates to be cut.
TAX AND REGULATION TRENDS
The Central Bank of Bahrain (the regulatory authority for Bahrain’s insurance industry) will enforce the payment of insurance premiums in full and compel insurers to pay brokers commission within 10 days on receipt of the premium.
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BELGIUM INSURANCE MARKET CONDITIONS
Belgium’s general liability market continues to be competitive. Risk management clients can, depending on the initial premium level, expect a decrease in rates of up to 20% and improvements in policy wordings.
Motor/Auto
Motor rates have remained low for several years, and clients can expect rates will continue to remain stable. However, a slight increase in premiums is expected later in 2013 because of the increasing cost of auto repairs.
Workers’ Compensation/Employers’ Liability
This market is beginning to firm, although underwriters are looking to retain existing clients through premium reductions.
New modelling techniques have changed underwriting capabilities for CAT-exposed property insurance, resulting in some insurers increasing capacity and others reducing it. Domestic business has shown strong competition in rate reductions (up to 30%). Increases in limits and broader wordings are negotiable for renewals at flat rates, and more underwriting information is requested for contingent business interruption (CBI) cover and for business interruption (BI) cover in general. Going forward, clients will be taking a closer look at business continuity planning (BCP) and business continuity management (BCM), as well as general loss-control programmes.
Environmental
More capacity has been made available.
Rates are remaining stable with each client risk under greater scrutiny. Capacity in the market is tempering any firming trends.
A competitive environment is ensuring that flat renewals can still be achieved (in some cases slight decreases). Underwriters’ due diligence remains robust, as they continue to focus on insureds’ financial performance compared to peers, the regulatory outlook, liquidity and capital adequacy, debt structure and maturities, and sovereign debt exposure.
New entrants to the market have ensured that rates will remain stable, even decreasing by 5% in some cases. Long-term agreements (LTA) are also available to clients with good risk profiles.
Marsh • 7
Medical Malpractice
Belgium’s medical malpractice insurance market has stabilised, following the lowering of interest rates from 1 January 2013 and premium adjustments on existing risks.
Marine Cargo
Abundant market capacity has pushed rates down. This is likely to continue in 2013.
As with medical malpractice, the decrease in interest rates and the economic crisis will lead to a stabilisation of the employee benefits market.
RISK TRENDS
MARKET TRENDS
There is plenty of capacity available across all lines.
Strong competition in the middle market is expected in 2013, as international insurers look to increase their market share and compete with local insurers.
Cyber coverage is the most significant insurance innovation trend.
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BOTSWANA INSURANCE MARKET CONDITIONS
Increasing competition in a soft market is forcing down rates.
Motor/Auto
While the incidence of claims remains high and the cost of repairs continues to rise because of a weakening local currency (the pula), competitive pressures remain for rate reductions across all classes.
Cover is compulsory and significant pressure remains on insurers to reduce rates. However, there are moves to increase basic benefits.
There is an established trend for rates to reduce in property insurance, which generally performs well with regards to claims. Increasing competition is also starting to push rates down.
Rates are expected to remain stable for the beginning of 2013, despite competitive pressures acting to drive them down.
Marine Cargo
Marine cargo remains a small class of business in Botswana and clients can expect rates to remain stable.
Insurers are under increasing pressure to reduce rates due to a saturated market and this is expected to continue in 2013.
RISK TRENDS
While moves to improve regulation should be welcomed, regulation is complex. The Non Bank Financial Institutions Regulatory Authority (NBFIRA), Botswana’s local regulator, will be introducing more stringent prudential rules on 1 April 2013 — penalties will be severe.
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CZECH REPUBLIC INSURANCE MARKET CONDITIONS
General Liability
Increasing competition in general liability insurance should see rates decrease by up to 10% for those with good risk profiles.
Motor/Auto
Major insurers are planning to increase rates because of concerns over long-term profitability — a trend that will mostly affect individual policies rather than fleet cover. Although the number of policies is still growing, rates have decreased (by 4.4% in car liability and 1% in voluntary vehicle insurance). Insurance companies will likely increase rates in car insurance for renewals in 2013, reacting to the anti- discriminatory clause following EU Directive 2001/113/ES.
Property rates are expected to remain stable, although in some cases for non-CAT exposed risk a slight decline at renewal will be possible.
Environmental
A new market in environmental cover for ecological damage was created on 1 January 2013, following changes to legislation around the Environmental Liability Act (167/2008) — a transposition of the European Directive 2004/35/EC. It is now mandatory for companies to be insured against the prevention and remedying of environmental damage.
There have been no D&O losses in the Czech Republic for many years and, as a result, rates have decreased by up to 10%. Penetration is still low and this insurance is not popular to buy due to the tax system. However, regulation expected to be introduced during 2013 should see it become more popular.
While rates remain stable across employee benefits, newly introduced anti-discriminatory laws have led to the creation of new life products. The life market is stagnating in the Czech Republic because of these new laws, and life insurance rates may begin to increase as 2013 progresses.
RISK TRENDS
MARKET TRENDS
The insurance market is contracting at about 0.6% — but mainly outside of the life insurance market, where it is contracting at 1.3%.
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DENMARK INSURANCE MARKET CONDITIONS
Denmark’s property market remains soft. However, a shift in the market may be coming, resulting in fewer insurers with attractive offers. Furthermore, insurers are trying to introduce limitations on float cover because of severe flooding in Denmark.
Some clients have been able to achieve small rate decreases over the last six months in what is a broadly stable, competitive market. 2013 is likely to see this trend continue.
Marine Cargo
Excellent claims ratios will ensure clients are provided with lower premiums at renewal for marine cargo insurance in 2013.
Travel insurers are increasingly focusing on compliance and pushing slight premium increases. An increase in medical expenses for expats in Asia and the US is expected to lead to premium increases of between 10% and 20%.
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RISK TRENDS
MARKET TRENDS
Increased competition could lead to rate reductions in some coverage areas in 2013.
Flood claims have meant that new clauses are being introduced by insurers, and premiums are liable to increase up to 10% in some cases.
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FRANCE INSURANCE MARKET CONDITIONS
Overall, France’s general liability market remains soft, and some clients are seeing a decline in rates of up to 20% (larger companies are seeing a decrease of up to 10%). There is strong competition among insurers for good quality risks with good loss records. The market is even softer on middle market clients, where there have been decreases of up to 70%. These trends are expected to continue through the first quarter of 2013.
Competition has been less intense than in previous years. Each renewal strategy is driven by the risk profile of each account, with CAT covers broadly more expensive for the same limits. Clients are starting to consider alternative risk-transfer techniques and binding long-term agreements (LTA) are very limited.
Environmental
On the back of mounting legislation and increasing claims, demand is growing across the globe for environmental cover. More of the same is expected in 2013, with premium levels decreasing by about 5% on medium risks that have a good loss history.
Competition remains fierce, with some insurers trying, with little success, to resist premium decreases. Although the macroeconomic trends aren’t positive, and the number of corporate bankruptcies remains high, a change in market trends isn’t expected in 2013.
Rates for bankers blanket bonds (BBB) have remained stable due to high capacity and the number of insured losses decreasing over time. D&O rates for French financial institutions will remain stable at the beginning of 2013, provided there are no further notifications in the Libor-Euribor scandal. However, insurers are becoming increasingly nervous, and rates could begin to firm in 2013. Professional indemnity (PI) generally rates will continue to firm in 2013 for financial institutions due to losses in previous underwriting years and adverse developments in 2012.
France’s professional liability market remains competitive, although the financial crisis has resulted in an increase in loss frequency for lawyers, accountants, and real estate brokers.
Medical Malpractice
Medical malpractice is an unpredictable market, although the overall trend suggests somewhere between stable rates and 10% increases. However, rates will largely depend on specific risks, practitioners, hospitals, and insurers.
Aviation
Rate decreases are expected to continue in 2013 due to overcapacity and few claims.
RISK TRENDS
MARKET TRENDS
The economic crisis has affected almost all sectors and investments, with many projects put on hold or postponed until 2013, or later.
Poor property underwriting results mean that current insurers in the market are being less aggressive in winning new business.
Cyber risk insurance is the buzz of the market and more clients are now considering getting insured against such risks.
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GERMANY INSURANCE MARKET CONDITIONS
There is still a lot of competition among Germany’s insurers, especially in the middle market. Cyber is a growing insurance line and additional insurers may enter the market in 2013, and with them enhanced wording.
Motor/Auto
Germany’s motor insurance market continues to firm and it is becoming increasingly difficult to get coverage for the most exposed clients.
Premium increases for CAT-exposed risks may be coming, and many underwriters are increasingly focused on contingency coverage. This market might trend firmer in the future.
Environmental
Environmental cover in Germany follows general liability cover and in most cases both are insured in the one policy. The market remained stable in the second half of 2012 and this is expected to continue throughout 2013.
Middle market companies are increasingly focusing on compliance and international programmes. Germany’s D&O market is expected to continue to see flat renewals and strong competition in the primary market.
Insurers are demanding more risk information, which is pushing rates up in many cases. The specific location of financial institutions can cause prices to increase at renewal.
Medical Malpractice
During 2012, a major insurer left an already very narrow medical malpractice market. In consequence, premiums for hospitals have significantly increased.
Marine Cargo
Clients with favourable loss records still enjoy premium decreases of 10%, or more. Premium increases are only acceptable if the loss record has been very poor with little chance of improvement. The majority of insurers are still aiming to grow their books, at least in particular areas, and market-wide loss ratios are still tolerable.
RISK TRENDS
MARKET TRENDS
The motor market in Germany is trending firmer, and there is increasing pressure on CAT-exposed property risks as well as clients with a bad claims ratio.
Opportunities remain for further improvements when claims ratios are positive and robust risk management is in place.
Significant competition between casualty insurers in the middle market is a noteworthy trend.
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GREECE INSURANCE MARKET CONDITIONS
A low loss ratio and reduced capacity are the major factors for the premium decrease. In 2013, further premium reductions are expected due to the pressure coming from clients for secondary cost-cutting.
Motor/Auto
Greece’s unfavourable financial situation over the last few years has pushed insurers to build new, simpler products with lower premiums and lower commissions for intermediaries. For 2013, premiums and coverages are expected to remain stable, or decrease in some cases.
Employers’ liability generally is seeing a rate reduction of around 5% due to the low loss ratio and available capacity. For 2013, further reductions are expected.
Greece’s acute recession could see rate reductions on property insurance of up to 30%. In these tough economic times, all insureds are looking for ways to reduce their insurance costs: revenues have shrunk, asset values have depreciated, and preferred deductibles have increased. These trends are expected to continue in 2013, as insureds continue to focus on reducing costs.
Marsh • 11
Environmental liability is now only offered through two insurers in Greece. Rates have reduced by almost 10% due to the economic recession and similar reductions are expected in 2013.
The majority of the capacity for D&O is offered locally by one insurer. The sharp economic downturn has greatly exposed companies, directors, and officers. A high loss ratio has meant rates remained stable in 2012, but more demand for this cover is expected in 2013 and rates are expected to increase slightly.
Rates reduced slightly in 2012 with the professional liability market seeing increased demand from designers, intermediaries and consultants. However, capacity is limited and local insurers are reluctant to quote for many professionals. The expectation for 2013 is for rates to stabilise or decrease by up to 10%.
Marine Cargo
The economic recession in Greece has dramatically affected import/ export companies, CMR (the convention on the contract for the international carriage of goods by road), and transportation in general. The cost of insurance has been significantly reduced, a trend that may be repeated in 2013.
Aviation
Aviation insurance is a small market in Greece and cover is only offered through one insurer. However, rates seem to be stable with expectations of a slight decrease in 2013.
The increased cost of hospitalisation and health plans has led to rate increases for health insurance. Also, due to the economic downturn, which affected the public health insurance fund, insureds are increasingly turning to the private sector.
RISK TRENDS
MARKET RISKS
Rates are significantly reduced due to the poor financial environment prevailing in Greece, which is impacting all clients. The devastating crisis is reducing insureds’ incomes and assets across the board.
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HUNGARY INSURANCE MARKET CONDITIONS
There is a negative trend in loss statistics for motor fleets so insurers have started to increase premium rates for some insureds.
In recent years, insurers have extended coverage to provide wider services to clients at competitive prices.
RISK TRENDS
Hungary has passed a law to introduce an insurance premium tax, effective 1 January 2013. The tax covers insurance companies registered in Hungary and Hungarian branches of insurers registered in any European Economic Area (EEA) state (or any other third country), as well as insurance companies providing cross-border services. The rates for the new insurance premium tax are 10% for all property and casualty (except for agricultural insurance), credit, surety, bond, legal protection, funeral, assistance and accident. Motor own damage insurance (Casco) will be taxed at 15%. Life and health will be exempt (but all accident elements relating to life policies are taxable). Compulsory motor third party liability (MTPL) will also be exempt, but the accident tax of 30% remains in place.
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INDIA INSURANCE MARKET CONDITIONS
This market is currently soft and this trend is expected to continue in 2013, with slight rate decreases of up to 10%.
Motor/Auto
Motor rates continued to firm during the final quarter of 2012, and this is expected to continue in 2013. There are two major factors for this trend. First, regulators are conducting an annual review on third-party premium; the parameters for this are the average claims cost, the frequency of claims, and the cost inflation index. Second, a government instruction to public sector insurers to request increased underwriting information before writing business has also increased rates.
Expect a continuing trend of a stable to nominally decrease for the year ahead, and the structuring of accident mediclaim cover, along with workers’ compensation insurance, to fully cover the legal changes within the Employees Compensation Act.
Natural CAT rates have been set at a minimum level by the General Insurance Council, which has led to a firming of CAT-exposed property. Non-CAT exposed property insurance rates have dropped to compensate during the year. A stable market is expected for CAT-exposed property insurance in 2013, while non-CAT-exposed property insurance may generally firm.
D&O rates remained stable in the fourth quarter of 2012 and this trend is expected to continue in 2013. Another trend in the D&O market is the increasing of limits from US$3 million to US$5 million — any one accident (AOA): any one year (AOY) — from base level limits of US$1 million. There has also been an increase in requests to extend full-scale benefits available to employees. A new Companies Act is still pending, but when it is passed it likely will result in class-action lawsuits and greater focus on corporate social responsibility (CSR) and corporate governance. Over time, this should deepen and strengthen this cover.
A stable market is expected to continue. Project professional indemnity rates are reinsurance driven and rated on project specifics.
Marine Cargo
Inland marine rates have firmed. Rates for project-based marine with delay in start-up (DSU) requirements are reinsurance driven. Rates are expected to firm slightly in 2013.
Employee benefits lines of business are expected to firm in 2013, as the Indian government notifies public sector insurers about stringent rules based on a combined ratio of 140%.
RISK TRENDS
MARKET TRENDS
Insurance rates on property (natural CAT), auto, marine, and employee benefits are expected to firm. The Indian government is worried about the mounting losses for public sector insurers, instructing them to hike premiums to ensure profitability, improve the combined ratios (which are currently hovering around 120%), and cut commission on loss-making products.
India’s Insurance Laws (Amendment) Bill, which proposes raising the foreign direct investment cap in the sector to 49% from the current ceiling of 26%, will be tabled in parliament. This would lead to greater underwriting capability within the Indian insurance market.
A bill will be introduced to separate motor insurance from The Motor Vehicle Act (1988). Sections 140 to Section 176 will be removed and renamed The Motor Vehicles Insurance and Compensation Act. It is proposed that this new act will include a cap of 1 million rupees on third-party compensation. This change will benefit insurers, currently burdened with auto liability claims. The Motor Vehicle Act currently provides for unlimited third-party injury coverage, which severely impacts insurers.
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Marsh • 13
Insurers are increasingly focusing on underwriting information, including claims, loss ratios, and limits. In 2013, insurers are expected to request changes to policies with a poor claims history.
Motor/Auto
Underwriters remain reluctant, as they have since the beginning of 2012, to provide fleet policies. As such, motor rates are expected to increase into 2013.
In general, the number and cost of claims are increasing. Insurers are requesting changes to policies (both deductible and premium levels) that have a poor claims history.
Some insurers are increasing rates (even if the loss history is good), although current rates in Italy remain low compared to other countries.
D&O claims will continue to rise, as companies in a poor financial state come under increasing scrutiny. However, rates are likely to remain relatively stable in 2013.
Italy’s financial institutions market is generally firming for professional indemnity (PI) and D&O liability insurance so clients may see an increase in rates of up to 20% in some cases.
Medical Malpractice
Rates for medical malpractice insurance have increased by up to 30% in Italy and no new insurers have entered the market. Deductibles have increased, and it is particularly difficult to place risks as insurers reduce the extent of their coverage. No changes are expected from this firming trend.
Marine Cargo
No significant rate changes are expected in 2013. Major issues exist regarding the exclusion of coverage for shipments to and from countries under embargo or sanctions from the UN, US, EU, or UK.
Aviation
Only a few insurers cover aviation risks, but there is strong competition among them. The forecast for 2013 suggests the trend of slight rate decreases will continue.
A continuation of the 2012 trend for employee benefits trends is expected in 2013, with life insurance remaining stable and health and accident and health increasing by around 10%.
RISK TRENDS
MARKET TRENDS
Northern Italy’s 2012 earthquake increased rates for both CAT and non-CAT property risks. There has also been a change in programme design and offers often include different conditions: higher deductibles, self-insured retention instead of deductibles, and lower limits.
The aviation sector is in crisis in Italy, as it is in many parts of the world, because of increases in fuel costs and competition from low-cost airlines. Many airlines are struggling to reduce costs, including their outlay on insurance, alongside a reduction in revenue and passenger handling. Despite this, with a good loss ratio on renewal, the trend of the last quarter of 2012 is for decreases, as new insurers enter the market.
Personal indemnity (PI) insurance will be mandatory for professionals from August 2013.
In medical malpractice, a high number of Italy’s insurers are leaving the market as it is highly capital intensive.
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LATVIA INSURANCE MARKET CONDITIONS
The general liability market has largely remained stable, but clients with a poor claims history could see rates increase slightly.
Motor/Auto
This market remains stable rates generally may slowly increase in 2013.
As a result of some large losses in Latvia, combined with insurers’ poor balance sheets, rates are slowly increasing. Two new insurers have recently entered the market.
This is a growing market in Latvia. Clients are increasingly looking for D&O coverage and rates are expected to continue to increase by up to 10%.
An increasing number of clients are looking for tailor-made solutions in all lines of employee benefits.
RISK TRENDS
MARKET TRENDS
Overall, insurance rates are slowly increasing in a flat to 10% range.
Clients are increasingly looking beyond price and evaluating more insurance coverages and insurers’ claims-paying reputation.
New insurers started operating in the country from December.
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LITHUANIA INSURANCE MARKET CONDITIONS
General liability rates are decreasing slightly and may begin to stabilise in 2013.
Motor/Auto
Voluntary vehicle insurance and motor third party liability (MTPL) rates are stable and this is expected to continue through 2013. Green cards for trucks are becoming very expensive due to numerous big losses.
Recent decisions of the Supreme Court have led to general accident insurance becoming less popular among corporate clients.
Increasing competition within the property market — for both CAT and non-CAT-exposed risks — has generally pushed property rates down.
D&O liability insurance has become more popular; this should continue for the foreseeable future. Awareness of potential liabilities has grown on the back of recent cases in which directors have been found guilty. Also, some lawyers are actively promoting the importance of D&O insurance.
Medical Malpractice
In what remains an undeveloped market, health care insurance is becoming more popular and likely will get more so in 2013. Lithuania’s tax system is favourable for medical malpractice and companies tend to use this cover as an additional incentive when competing for staff.
The employee benefits market is growing, becoming increasingly popular among clients. It is expected to increase in 2013, with rates remaining generally stable for the foreseeable future. Growth is largely influenced by favourable taxation.
Marsh • 15
RISK TRENDS
MARKET TRENDS
Property damage and business interruption (PDBI) and casualty insurance rates continue to drop.
The market continues to shift towards fee-based remuneration.
Directors and officers (D&O) insurance has become more popular and the market for this should continue to grow in the near future.
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MALAWI INSURANCE MARKET CONDITIONS
Increasing awards in courts for liability cases will likely increase the premium rates for liability classes in 2013. The Insurance Association of Malawi is considering coming up with minimum rates, which are broken down by the class of insurance and nature of business.
Motor/Auto
Rates: Increase more than 30%
Motor rates have increased by more than 50% as insurers reposition themselves to recover from their losses. Insurers likely will maintain the same approach of increasing rates until they fully recover, and therefore, further rate increases of at least 15% are expected in 2013.
The increase in liability awards by the courts is leading insurers to raise rates by an average of between 10% and 20% and to continue to impose maximum limits per claim. In the near future, insurers will reopen negotiations with the government, which plans to take full responsibility for the risk through the establishment of a workers’ compensation fund or an employers’ liability fund.
Inflation in Malawi is running at about 30%, with rates likely to increase in 2013 to cover the increased cost of doing business in the country. Property values have also generally increased, although the insurance pool is very low. The government, which is Malawi’s biggest investor, does not insure its properties or projects.
Medical Malpractice
Rates have remained at around 2.5% of the limit and no increases are likely in the near future. Clinical trials have remained around U$10,000 for a US$500,000 limit, which should continue in 2013.
Marine Cargo
Rates have remained stable in marine cargo over the years, and there has not been any growth in this sector due to a lack of foreign exchange and clients’ inability to import raw materials. Also, a dearth of new investments in manufacturing plants, upon an already poor manufacturing base, has affected growth. Rates likely will be stable in 2013.
The enactment of the Pension Act 2011, which made pension and group life cover mandatory, has led to growth in this area. Insurers have been accommodating on the rating of risks due to the increased volumes; in most cases the increases are no more than 10%, while there have even been reductions on large portfolios.
RISK TRENDS
MARKET TRENDS
Malawi’s 15-year soft insurance market has greatly affected the financial capacity and solvency ratios of the country’s insurance companies. As a result, there are moves to impose minimum rates and strengthen debt collection.
Malawi is exposed to increasing motor claims that are not supported by adequate premium rating and lack of volume. This trend has affected the performance of almost all insurers.
Plans are in place that would allow the government to build its own workers’ compensation fund to settle claims, but to date these plans have not been realised.
In the last four years, Malawi’s insurance market has seen the introduction of various pieces of legislation: the Financial Services Act (2010), the Insurance Act (2010), the Pensions Act (2011), and various directives including on premium payments, solvency ratios, and corporate governance. The Premium Payment Directive enforces the rule that premiums can only be paid to insurers, not brokers, completely disrupting the broker insurer client triangle.
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NAMIBIA INSURANCE MARKET CONDITIONS
There has been very little movement in this market with very few claims. The Consumer Protection Act is expected in the next two years, which could change the liability landscape.
Motor/Auto
Motor loss ratios are under pressure. The 2011 Japanese tsunami has continued to weaken the supply chain for the delivery of auto parts, and the cost of repairs for more sophisticated vehicles has risen.
Property insurance is a very stable market as there have been no major recent losses. Insurers are under pressure to grow their books, so the current soft market is expected to continue with most clients expecting a rate reduction of up to 10%.
Environmental
There has been very little movement and no losses reported in environmental insurance, ensuring that rates have remained stable. However, this could change in the near future as new companies enter Namibia’s uranium and oil industries.
Medical Malpractice
The medical malpractice market has experienced an inflation-related increase in rates.
Aviation
Although aviation is a small market in Namibia, increased competition has meant that rates are expected to decrease by over 10%.
RISK TRENDS
MARKET TRENDS
Commercial rates have decreased by roughly 10% and 20% year-on-year, with construction rates decreasing by as much as 50%.
Fires and accidents cover declined, but motor prices have come under pressure.
The New Financial Institutions and Markets Bill (FINBILL) will have a significant impact on the industry. Strict qualification requirements, as well as compliance requirements, will lead to an increase in the cost of compliance. As in South Africa, there is likely to be a consolidation as smaller independents are sold to big broking houses.
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NETHERLANDS INSURANCE MARKET CONDITIONS
Some insurers are trying to introduce rate increases, but with little success, as competition remains fierce, especially for exposures considered excellent. In 2013, some insurers may try to increase rates again, but as there are no signs of decreasing capacity rates are likely to remain generally flat.
Motor/Auto
After a few years of heavy competition, the market appears to be becoming stable. Several insurers are increasing their premiums so rates can be expected to climb in 2013.
While the property market has remained stable, premium rates for CAT exposed limits have seen increases of between 10% and 20% and long-term agreements (LTA) have come under greater scrutiny. These trends are expected to continue throughout 2013.
Environmental
The number of insurers writing this class of business is relatively small, but as competition remains stiff no rates increases have been introduced. Although there is increasing awareness of environmental risks, interest in buying environmental impairment liability (EIL) cover remains low.
Commercial D&O insurers are still offering small premium decreases, as new entrants engender more competition. However, the market seems to be levelling because of the economic downturn, which is resulting in more claims.
Marsh • 17
The financial institutions market is clearly firming — both for D&O and professional indemnity (PI)/crime insurance. Premiums may increase by up to 10%, combined with decreased capacity and appetite. Only a few insurers in the Netherlands appear interested in primary participation.
In 2012, the professional liability market was ultra-competitive. As capacity is expected to expand, competition in 2013 will be even more extreme, hurting the technical results of insurers trying their utmost to stay in the market.
Marine Cargo
Although premiums in the Dutch cargo market are already very competitive, a small decrease in premiums might be given in some cases.
RISK TRENDS
MARKET TRENDS
The very first signs of a firming market are evident, with some insurers strictly focusing on underwriting results instead of premium growth.
On 1 January 2013, the Netherlands’ insurance tax increased from 9.7% to 21%. This will cause a substantial increase in the total cost of insuring against risk in the country. It is expected that providers of insurance and risk services will make a clearer split between their policy-related activities and the other activities (e.g. risk consulting).
Also, from 1 January 2013, insurance agents will no longer be paid commission by banks and insurance companies on mortgage, life insurance, and funeral insurance policies. Instead, they will have to charge consumers for advice. The commission ban does not affect the non-life insurance market.
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NIGERIA INSURANCE MARKET CONDITIONS
Rates are likely to increase due to the high level of insecurity within Nigeria.
Motor/Auto
Motor rates in Nigeria have increased slightly, which can be attributed to an influx of vintage cars. Also, the cost of third-party claims has increased. These trends are expected to continue in 2013.
Clients with CAT-exposed risks can expect to see a decrease in rates of up to 10%. With more people in Nigeria purchasing gadgets — including smart phones and televisions — the demand for property cover has increased.
An increased awareness of corporate governance and a reduction in errors and omissions (E&O) have seen rates stabilise — trends that are expected to continue throughout 2013.
A rise in cyber crime and ATM card fraud has pushed up rates for financial institutions insurance by up to 10%. It is expected that this will continue in 2013.
Professional indemnity insurance (PI) rates in Nigeria have increased by between 10% and 20% because of the increased awareness of the liability exposure that professional clients have in the event of negligence. It is likely that the market will continue to grow in 2013.
Aviation
Rates rose in 2012 following an air disaster in Lagos, which added to the inherent instability of aviation rates.
In view of the cash crunch in Nigeria, employers are using employee benefit cover to compensate their injured employees and avoid costly industrial and court disputes. Employees are also becoming increasingly aware of the option to claim from their employer.
RISK TRENDS
MARKET TRENDS
Recent losses have led to underwriters making changes in programme design retentions, limits, terms, and related issues.
New regulations will be introduced by NAICOM (Nigeria’s regulatory body) enforcing the “no premium no cover” provision, that states that premiums must be received by the underwriter/broker before insurance cover is confirmed. Not doing so will attract a heavy fine of no less than N250,000 for each cover granted before receipt of premium.
The Employees Compensation Act, which repealed workers’ compensation insurance, enlarges areas of claims (for example, claims can now be made for depression and mental stress).
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NORWAY INSURANCE MARKET CONDITIONS
Liability rates in Norway stabilised in the latter half of 2012, with some clients able to secure a reduction when their business is tendered. However, further stabilisation of the market is expected in 2013.
Motor/Auto
This is a stable market with rates heavily dependent on loss ratios.
D&O facilities negotiated in the Nordics have seen substantial premium savings of as much as 50%.
RISK TRENDS
MARKET TRENDS
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OMAN INSURANCE MARKET CONDITIONS
A lot of construction is taking place in Oman this year, particularly in Duqm, a strategic port town between Muscat and Salalah. Many insurance programmes could be principal-controlled, and contractors will be required to carry third party liability (TPL) insurance. Coupled with Petroleum Development Oman’s (PDO) ambitious plans in 2013, there could be a spurt in TPL insurance.
Motor/Auto
New unified motor policy wordings have been introduced in favour of the client. Some insurers have revised their ratings, owing to their adverse claims experience. The Capital Market Authority has stipulated a percentage of vehicles covered by each insurer must be miscellaneous vehicles, such as taxis.
Following the riots in Sohar, there have been restricted limits for strike, riot, and civil commotion (SRCC) covers for risks in this industrial town. Also, underwriting on warehouses has become more cautious due to some recent fires in industrial areas. However, beyond these incidents things have been largely stable.
With the anticipated boom in construction there is likely to be see high demand for consultants’ professional indemnity (PI) cover.
Marine Cargo
Oman’s marine market has sufficient capacity and remained soft for good risks in the latter part of 2012. This is expected to continue throughout 2013.
Group medical insurance rates are increasing, owing to the adverse claims ratio contributed by medical inflation. Group life cover continues to soften.
Marsh • 19
RISK TRENDS
MARKET TRENDS
Following sporadic incidents in Sohar, cover limits have been imposed by some insurers on strikes, riots, and civil commotion (SRCC) covers.
New unified motor policy wordings have been introduced — differential excesses for vehicles are being applied by certain companies. Rates have remained fairly stable; albeit with some insurers raising rates because of their unfavourable claims experience.
Subsequent to the developments in Sohar, there has been an increase in corporate clients seeking to insure their Omani employees and their families.
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POLAND INSURANCE MARKET CONDITIONS
Insurers continue to pay out insufficient compensation due to underinsurance, although prices are expected to increase to ensure adequate indemnity in the event of a claim. This trend is particularly noticeable in the energy, construction, and food sectors. Expect greater price stability in 2013.
Motor/Auto
Clients with a high claims ratio will have difficulty obtaining third party liability (TPL) insurance and can expect rates to remain high. Small modular area repair technology (SMART) is becoming more widely utilised, as it is becoming more popular with insurers that recognise its value in lowering repair costs, and therefore, the amount of claims.
Insurers are increasingly imposing additional requirements on companies, which are sometimes difficult to meet. This situation is likely to change with signs that confidence is slowly returning to the market, particularly given the large, imminent investments in the energy sector.
Although D&O rates continue to decrease there are signs that the market is beginning to firm. Renewals for clients in poor financial conditions have resulted in restrictions in their terms and increases in their premiums.
Rate increases in the latter part of 2012 were driven mostly by significant growth in the size of the banking sector in Poland and the payment of claims. Rates are expected to rise by between 10% and 20% in 2013.
RISK TRENDS
MARKET TRENDS
2013 may be a difficult year for insureds in Poland with rates across the vast majority of lines appearing likely to increase.
Recent losses in the construction, travel, and agricultural industries have helped lead to insurance pricing increases. This has led many businesses to reduce the scope of their insurance in order to lower costs.
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QATAR INSURANCE MARKET CONDITIONS
More reinsurers have started operations in Dubai, with a regional focus. This has led to an increase in available capacity in the Qatari market, which could influence on rates and increase competition for liability business.
Motor/Auto
Qatar’s motor insurance market is witnessing reducing rates as more insurers compete for the same business. Motor insurance is often used by insurers to open doors to other lines of business.
Increased market capacity due to new insurers entering the market is having an impact on rates. Also, recent fire claims have increased awareness among insureds about fire protection and safety requirements. The government is enforcing minimum fire safety standards for properties in Qatar, and it is likely that rates will continue to decrease slightly in 2013.
Directors and officers are becoming increasingly aware of the need for insurance. There have been a relatively small number of D&O claims in the Qatari market, and the arrival of more reinsurers in Dubai has increased the capacity of the market. Rates are expected to decrease slightly in 2013.
There has been in increase in reinsurance activity more active reinsurers and increased awareness about financial institutions insurance.
There has been an increase in reinsurers active in the region for personal liability insurance to meet an increase in demand.
Medical Malpractice
More insurers are now in the medical malpractice market. Legislation from Qatar’s government to make medical insurance mandatory is pending, but its implementation will nevertheless be phased in.
Marine Cargo
A decrease in imports means that there are very few businesses in this market. However, new insurers have increased capacity and as a consequence many are keenly chasing the same business. However, new construction projects are expected to increase project cargo insurance requirements.
Qataris are increasingly aware of life insurance. Capacity is increasing to meet demand, and impending legislation for mandatory insurance is anticipated from the government.
RISK TRENDS
MARKET TRENDS
Qatar’s construction industry is witnessing a large number of new companies starting operations — all have an eye on FIFA World Cup 2022 projects.
This segment should be a key driver for insurance business in the forthcoming years. However, a delay in launching new projects is putting pressure on rates.
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ROMANIA INSURANCE MARKET CONDITIONS
General liability insurance cover, unlike most of Romania’s insurance market, has grown, seeing a continuous upwards trend for the past three years. Clients can expect rates to remain stable.
Motor/Auto
Losses have increased in Romania’s motor insurance market, but with motor lines making up about 60% of the total insurance market, competition remains high.
Insurers are trying to impose a 1% deductible on earthquake risk. Most companies are looking to reduce costs and are therefore willing to accept this.
RISK TRENDS
MARKET TRENDS
Numerous reports from insurers suggest that prices will rise, especially on motor third party liability (MTPL).
Liability and health insurance are the only insurances that registered growth in 2012. The health insurance market is likely to continue to grow in volume and prices appear likely to remain stable.
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Marsh • 21
The general liability insurance market in Russia is still underdeveloped, apart from for activity covered by new legislation for compulsory liability insurance for businesses working with hazardous objects. The tariff system in place provides quite narrow coverage (with extensive premiums and low limits). The trend for 2013 appears to be for rates to remain stable.
The insurance market for real estate remains competitive. However, rates for power and utilities (P&U) have declined, and many insurers are not prepared to support a further rate reduction.
The loss ratio of banker’s blanket bonds (BBB) increased dramatically in 2012. As such, rates are expected to increase between 10% and 20% in 2013.
Rates within employee benefits are likely to remain stable at renewal, with the exception of health benefits, where clients may see a small increase.
RISK TRENDS
MARKET TRENDS
The creation of a single customs area with Kazakhstan and Belorussia is expected to lead to the standardisation of insurance requirements. If the Kazakh model is adopted, allowing only fee-based contracts, brokers can expect less revenue.
The property and casualty market continues to soften with increasing treaty capacity on the market.
There is much less appetite from the markets to offer banker’s blanket bonds (BBB) coverage due to high loss ratios.
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SERBIA AND MONTENEGRO INSURANCE MARKET CONDITIONS
General Liability
The general liability market began to firm towards the end of 2012. Serbia and Montenegro has seen a slight increase in reported claims, along with an extension in the scope of coverage adding to costs.
Motor/Auto
There has been a general decrease in rates following an increase in competition in the auto insurance market.
While CAT-exposed risks are expected to see rates remain stable in 2013, clients can expect to see a slight decrease in rates for non-CAT exposed risks. There have been very limited CAT losses in the recent past and property claims have decreased in last year following a general improvement in fire and safety protection measures.
Rates have increased on the back of the limited availability of this financial product and significant underwriting costs.
Rates: Decrease 0-10%
Employee benefits products have become more widely available alongside increased market competition. However, growth is slow in this market as it is not a high priority for most of the population.
RISK TRENDS
MARKET TRENDS
There have not been any significant losses in Serbia and Montenegro recently, so insurers’ premium
rates for special types of risk exposures (for example, natural CAT and terrorism and sabotage) remain largely unchanged.
Serbia and Montenegro’s insurance market is seeing some of the same trends as in the EU and US — such as the inclusion of all risk policies, including a significant number of deductibles, numerous risk clauses, and additional remarks/risk coverages.
The Serbian market currently has 26 insurers operating in it. There are four insurers (one state-owned) that are dominant and preferred insurers. Other insurers are focusing mainly on movable asset insurance (cars, homes, travel, and multiple).
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SLOVAKIA INSURANCE MARKET CONDITIONS
Slovakia’s insurance market remains soft with no firming trend. Slovakia neither allows a waiver of subrogation, nor does it limit liability up to a certain amount (limiting liability is the client’s decision). No major changes are expected in 2013.
Motor/Auto
Strong competition in the Slovak motor insurance market has brought about a decrease in premiums, with no major changes expected in 2013.
Environmental
Environmental pollution cover is a new line of insurance. Slovak legislation, transposed from EU legislation 2004/35/EC, became effective on 1 July 2012. Clients that might cause environmental damage, according to Slovak Act No. 359/2007 Coll. on the prevention and compensation of environmental damage, are obliged to take out financial coverage against their liability for environmental damage, including expenditures for remediation activities — and take measures to make good the environmental loss or damage. No major rate changes are expected in 2013.
RISK TRENDS
MARKET TRENDS
The liability, motor, and environmental insurance markets remain soft; in fact, the whole insurance market in Slovakia shows no signs of firming.
There have been no major changes in deductible levels, and no significant losses affecting the Slovak insurance market.
There is strong competition within the general insurance market despite there being no newcomers.
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SOUTH AFRICA INSURANCE MARKET CONDITIONS
General Liability
Abundant capacity and competition in the general liability market mean that rates are likely to be stable in 2013. The Consumer Protection Act has increased the awareness of consumers of their legal rights, and the amount being claimed for injuries has increased markedly over the past two years.
Motor/Auto
Capacity and competition is abundant. The South African Insurance Association (SAIA) has an ongoing national drive to improve all aspects of auto risks and insurance.
There remains abundant capacity and competition in this market, which should keep rates stable in early 2013.
CAT-exposed risks are likely to see a rate increase in 2013, which is in stark contrast to the decrease at the start of 2012. However, abundant capacity and strong competition among insurers could see non-CAT rates reduce in 2013.
Marsh • 23
Medical Malpractice
South Africa has a small market for medical malpractice insurance and many reported claims; therefore, see rates may increase by up to 20% in some cases.
Aviation
This is a small market, mostly covering general aviation within South Africa. Expect abundant capacity and competition going into 2013.
RISK TRENDS
MARKET TRENDS
Hailstorms were more intense over the fourth quarter of 2012: more than 100 thatched dwellings were damaged or destroyed at the coastal holiday resort of St Francis Bay.
The market should remain stable for well-managed risks in 2013.
Tighter customer protection, as well as insurer and intermediary legislation, remain in the pipeline for 2013.
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SPAIN INSURANCE MARKET CONDITIONS
The general liability market in Spain has seen premiums decrease by 10% to 20% on average with numerous insurers pushing to write business. A number of insurers entered the market in 2012. It is expected that rates will also decrease in 2013.
Motor/Auto
Insurers have been aggressively striving for business, which has helped motor rates continue to decline by 10% to 20%, regardless of loss history. However, there are some signs that the market is beginning to firm, with insurers starting to look more carefully at the loss history before providing terms.
Environmental impairment liability (EIL) insurance will not be mandatory until at least 2016, so only larger clients typically are buying this type of coverage. Clients may see rates to decrease between 10% and 20% in 2013.
Environmental
Environmental impairment liability (EIL) insurance is not mandatory until at least 2016, so only larger clients typically are buying this type of coverage. Clients may see rates decrease 10% to 20% in 2013.
In general, D&O is one of the more stable lines of business in Spain with the exception of those industries most affected by the economic downturn.
The financial crisis has impacted the rates for financial institutions as well as rates at renewal. Rates may generally increase in 2013.
Rates are coming down, although Spain’s personal indemnity (PI) market is not particularly aggressive on price due to the number of loss results.
Medical Malpractice
The market has become more aggressive as new insurers enter the market in 2012. Rates will continue to decrease in 2013.
Marine Cargo
Increased competition in the market has seen premiums driven down, so it is even possible for clients with bad loss ratios to achieve a rate decrease.
Increased competition in the employee benefits market has caused rates to decline slightly, especially in A&H. Rates across all lines of employee benefits are likely to stabilise in 2013.
RISK TRENDS
MARKET TRENDS
Clients in Spain are increasingly asking for premium reductions while demanding the same level of coverage.
In the corporate segment, reductions of 20% to 30% are possible for property and liability insurance lines in 2013.
New insurers entering the Spanish market are being aggressive around pricing on some lines of business, although they don’t always offer products that meet all clients’ needs.
Insurers generally are trying to become more active on international programmes to balance their book with operations abroad, which are not as heavily impacted by the financial crisis in Spain.
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SWEDEN INSURANCE MARKET CONDITIONS
Rates generally are decreasing due to the large number of insurers and a fairly good claims ratio.
Motor/Auto
Some insurers have left the motor business and those remaining have pushed through some premium increases on the back of poor claims results.
Clients with natural CAT exposures have seen some rate changes — and insurers are asking for more information about the risks. For property there have been some decreases with many insurers trying to win new business.
Environmental
There is a small choice of insurers in this market but because of the low number of claims locally rates have decreased in some instances.
The D&O market remains soft in Sweden and rates are expected to continue to decrease in 2013.
Many insurers are targeting Sweden’s professional liability market. There have been minor changes in rates and a fairly good appetite for risk. As such, clients generally may see decreases in rates of up to 10%.
Medical Malpractice
A high claims ratio has resulted in generally higher rates.
Marine Cargo
Marine cargo is a stable market with some large insurers dominating. Some new insurers have entered the market, but the rates remain constant at present, which is expected to continue in 2013.
RISK TRENDS
MARKET TRENDS
Loss experiences in Japan and Thailand have led to major insurers trying to increase their property damage rates.
There have been changes in insurers participating in the market, with new potential participants approaching the Swedish market.
More cyber-related products are hitting the market in Sweden, with new products designed to cover growing and emerging risks.
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Marsh • 25
A competitive market is keeping premiums generally low in instances where the individual loss experience is good. There is no sign of this changing in 2013. However, the quality and speed of claims handling by insurers is not satisfactory because of the ongoing cost pressure.
Motor/Auto
The market generally is stable, although clients with a negative claims experience saw premium increases. In 2013, increases in the 10% range are likely.
Workers’ Compensation
Switzerland’s workers’ compensation market is at the end of a soft cycle. While the majority of insureds are likely to see rates remain stable, those with losses may see premium increases.
Switzerland’s property insurance market remains competitive. The quality of risk information, good loss history and moderate natural CAT exposure remain important for receiving good quotes. Global underwriters are focusing on more restrictive underwriting, especially with natural CAT coverage — including contingent business interruption (CBI) — compared to domestic underwriters. It remains to be seen whether Superstorm Sandy — the windstorm that hit the east coast of the US in October 2012 — will have a significant negative impact on international business in 2013. The Swiss market appears stable heading into 2013.
Further decreases in premiums are not expected, but it remains a competitive market due to the large amount of capacity.
The market for financial institutions remains difficult. The pressure for rate increases is being driven by increases across property and casualty rates, poor investment income opportunities, and claims in the financial institutions sector. Insurers are now extremely resistant to price decreases and many clients will face a rate increase. Clients with good loss histories are likely to see flat renewals instead of a decrease.
Medical Malpractice
The medical malpractice market is relatively small, so insurers can be selective in their placement and follow strict underwriting guidelines. The market is not expected to change significantly in the near future, but may see increases of up to 10% in 2013.
Marine Cargo
In general, Switzerland’s marine cargo market remains soft. However, clients with bad loss histories may face premium increases of up to 50%.
Aviation
Increased capacity is generally driving premium rates down.
Clients will likely see more rate decreases, although the bottom of the soft market may be reached soon. Good risks generally have the potential for rate reductions, but some clients may see premium increases.
RISK TRENDS
MARKET TRENDS
Inland losses have been low with few natural catastrophes this year. Pure inland risk providers have more favourable loss ratios than global insurers with higher loss ratios in general.
Increased regulation of the Swiss insurance market is likely. Revisions to insurance laws already underway will require insurers and brokers to change contracts and policy wordings.
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TURKEY INSURANCE MARKET CONDITIONS
Insurers are requesting a greater level of detail in 2013 submissions, and new wordings and additional clauses will be under greater scrutiny. Deductible levels are expected to increase, and it generally will be difficult to obtain cover from local markets.
Motor/Auto
The Turkish motor market remains firm and on average rates are increasing up to 10%, although this is dependent on clients’ loss history and the amount of premium paid in previous years.
Workers’ Compensation
New legislation is being introduced on the insurers’ reservation calculation. As a result, insurers are holding onto more reserves for their outstanding claims. The nature of this line of business means that outstanding files may last more than a couple years, negatively affecting insurers’ balance sheets. The frequency of claims and court decisions against insurers are increasing year-on-year; therefore, the premiums collected for workers’ compensation generally are insufficient

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MARKET PERSPECTIVE EUROPE, MIDDLE EAST AND AFRICA EMEA INSURANCE