U.S. communications, media, and technology (CMT) companies can expect their insurance market conditions to further deteriorate in 2012, continuing a trend that began in the second half of 2011, according to a report published by broker Marsh.
Large natural catastrophes in 2011 affect many CMT supply chains and property exposures. The most notable was the earthquake and tsunami in Japan. This has prompted insurers to begin raising rates for companies in the sector, according to Marsh’s report, Navigating the Risk and Insurance Landscape: U.S. Insurance Market Report 2012.
Marsh’s U.S. CMT clients renewing their insurance programs in the fourth quarter of 2011 generally experienced more moderate rate decreases than in the year prior and in other cases flat to slighter higher rate hikes. On average:
- property insurance rates were down 3 percent;
- general liability insurance rates were up 1 percent;
- workers’ compensation rates were down 2 percent;
- directors and officers (D&O) liability rates were flat to down 10 percent
- errors and omissions (E&O) insurance rates were down 5 percent.
“The commercial insurance market is in a state of transition entering 2012,” said Tom Quigley, U.S. Leader of Marsh’s CMT Practice. “Several indicators, including substantial catastrophe losses in 2011, suggest that rates may have bottomed out.”
Quigley believes that insurers will likely seek to increase rates for CMT companies in 2012.
“Those companies that can work with their insurance advisors to present their programs in the most appealing manner—providing complete, accurate, and quality data to underwriters—should be best positioned to secure favorable rates,” Quigley said. “It is also important for insureds and their advisors to closely examine other terms, including coverage retentions and limits.”
In addition to information on insurance market conditions, Marsh’s report identified several trends that CMT risk managers should monitor:
- Exposure to cyber security lawsuits will likely increase for CMT companies that experience a cyber breach as a result of a recent U.S. Court of Appeals for the Ninth Circuit decision. The decision, Krottner v. Starbucks Corp., gives plaintiffs whose personal information was stolen but not yet misused more latitude to seek damages. Rates for privacy and cyber insurance increased in the fourth quarter of 2011.
- The continued development of cloud computing comes with a number of risks for CMT companies to manage, including data security, patents and copyrights, and performance.
- Game-changing innovations continue to fuel a parade of mergers and acquisitions among CMT companies, leading to broad changes in their risk exposures.
Marsh’s annual U.S. Insurance Market Report provides information on commercial insurance market trends and conditions for all major classes of business and more than two dozen industry and specialty lines.