TRIPRA Threatens Resurgent Insurance Markets
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Crickets creek, frogs croak, and the water of the salt-marsh gives a slight “plop” as a heron places one elegant foot down in the mire. Far above the trees, the sun peers down, warming the Earth and creating a mid-morning haze that weighs heavily upon the shoulders of a man who trudges determinedly forward through the debris.

Two centuries later, a bridge crosses over where the man once stood, and traffic flows freely over what had previously been a road block for further exploration and commercial opportunity. U.S. commercial property insurance markets have similarly paved their own way out of the mire that was the Great Recession. According to the recent Marsh report, prices for commercial property insurance will continue to decline in 2014 due to an excess of capacity and low catastrophe losses.

Such capacity invited new insurers in umbrella and excess markets to try their hand. With the addition of quite a few new players, competition escalated, resulting in the stabilization of market prices. Competition will continue to grow in 2014 in most areas. The keyword is most; the few that will not benefit from further growth are higher risk areas (i.e. energy, chemical, life sciences, and construction industries).

The competitive liability market will mirror the commercial property insurance market. Favorable risks driven by the available capacity and a surplus of capital among insurers and reinsurers will keep competition high. And yes, it will more than likely lead to either stable prices or force them to decline.

Workers compensation has started to struggle a bit as claim costs rose in 2013 and experts fear those escalating premiums could carry over through this year. The struggle will not significantly affect all companies. Those organizations with superior risk profiles should get the best results and avoid getting weighed down in the mire of workers comp insurance.

Terror may also potentially act as a road block for insurance companies and buyers alike this year, as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is set to expire. According to the report, “Many organizations face uncertainty now, and the cost of property terrorism insurance could become volatile if TRIPRA is not reauthorized.” Uncertainty is about the furthest thing from stability, and could play a major role in the performance of certain insurance markets in 2014.

Competition, capacity, and capital investment are paving the way in the competitive liability insurance and commercial property insurance markets. With plenty of room to grow this year, these liability and property insurance should be some of the more entertaining markets to watch this year.