News Article : Buy more now . . .
|Category:|| Short-Term Insurance : Commercial|
|Posted:||29 Aug 2005|
Rates still soft
The global commercial market is characterised by excess insurance and reinsurance capacity, two years of good underwriting profits and premiums that are going onto the books at lower levels at renewal date.
It's a scenario that's manifesting in a proliferation of local and foreign cover alternatives adding to choice and competition. Moreover all this is happening against the background of SA's ongoing political and economic stability and stepped up market regulation, with little to distinguish it from global markets.
Given this scenario South Africa is sharing fully the benefits of the soft global market for commercial covers. However, by the same token, no rates honeymoon remains intact forever and there's evidence that market cycles are shortening says Andrew Chislett, Glenrand MIB's National Executive Director, Risk Services.
"Historically market rates have moved in cycles of eight to nine years. Now the pundits are talking in terms of two to three years due to the macro economic climate and the ability of markets to change more rapidly.
"Predictions are that pressure will be maintained on short term rates for now but interestingly it's unusual to get more than an eighteen month quote, hinting that the industry expects a rates turnaround.
"Clearly the market has been at pains to avoid the worst excesses of the cyclical dynamic of the past, which so damaged underwriters' balance sheets, reputations and trust and in my view that also suggests rates won't soften much further.
"Having said that, the short to medium term outlook is one of a continuation of the soft rates cycle, and, in combination with the strong rand and low inflation, asset protection will remain easier to fund. There's therefore a case to be made, at least for now, for taking advantage of the scenario by perhaps buying more cover for less premium.
"A note of caution - ever lower premiums should not be pursued at the price, literally, of quality cover. The burgeoning numbers of underwriting agents in the market make that a possible pitfall and at the end of the day it's all about the quality of insurance paper.
"Underwriting agencies with good accreditation, or 'binders' in industry parlance, should be the criterion by which to place business and bluntly, the least expensive premium may not be the best in the context of correctly scoped risk management."
For further information please contact Andrew Chislett on 011 329 1302 Cell 082 885 0141 or email to: [email protected]