CAT pricing improvements fall short of expectations

Upon recent monitoring of the terms and conditions regarding the global property catastrophe insurance renewals for Jan. 1, 2006, Standard & Poor’s Ratings Services says it is concerned that improvements in pricing and coverage terms might not be as significant as previously anticipated.

“Material improvements in pricing and coverage provisions in lines of business most affected by the 2005 catastrophes – including energy (offshore/onshore), U.S. coastal property, and property retrocession – have indeed been attained,” S&P’s reports. However, these improvements are only being realized regionally, where the catastrophes occurred, and improvements do not appear to have spread to other geographic areas and lines of business, S & P’s adds.

These other, ‘less successful’ areas indicate static trends in both pricing and terms and conditions. “This is contrary to our expectation that increased frequency and severity assumptions would support material improvements in pricing and coverage terms outside of purely those contracts and locations that suffered losses in 2005,” S&P’s reoports. “The trickle-down effect on other lines of business seems to have been limited so far.”

S&P’s notes that the market trends it has been monitoring are not set to be fully developed until Florida renewals are complete around July 1, 2006.