Chief financial officers with top North American property/casualty carriers believe the P/C market is hardening, but disagree over how long the trend will last, according to the results of a new Towers Watson survey.
Towers Watson interviewed 23 CFOs with carriers specializing in several business types and representing several organizational structures and distribution systems. Nearly 75% agreed that the property market is hardening—a sharp departure from 2011’s survey results, which indicated a softening market.
However, CFOs were nearly split on whether the trend would continue beyond the next one or two years. 51% of respondents believe the hardening trend in property will last, while 52% of respondents believe the same of the casualty market.
Those who believe hardening in the casualty market will continue for the next two years say it will last longer than hardening in the property market.
Bruce Fell, a managing director in Tower Watson’s Risk Consulting and Software business, said the trends indicate good times ahead for those in the P/C market.
“Insurers’ perceptions of the market have changed considerably, from a glimmer of hope for a turn in the insurance cycle, to the solidifying of firmer rates we’re experiencing today,” Fell said. “The impact of the softer market the past several years, combined with low interest rates, has hurt insurers’ profitability. The state of today’s market should give insurers some breathing room and an opportunity to increase their bottom-line.”
Fell added that the current hard market differs from hard markets of the past because it is characterized by the rational use of capital and low investment yields, rather than a reaction to poor pricing and scarce reserves.
The CFOs also answered questions on their biggest concerns for the future. More than 80% cited interest rates as their biggest concern, followed closely by natural disasters (44%) and inadequate rate levels (34%).