In a new report on the insurance market outlook for 2014, Wells Fargo gives a conservative estimate of the year ahead.
The report says: “2014 should provide a stable to somewhat competitive environment for business insurance.”
The report finds that market capacity is currently at an all-time high for most major lines of business, and that the ILS market for catastrophe perils has grown by 16 percent annually over the last three years.
Slow growth in traditional investments has also contributed to the success of ILS, and market practitioners have taken advantage of the fact.
Hedge funds and other capital market investors find these vehicles increasingly attractive as an uncorrelated area of risk with generally superior returns.
The report calculates that if this rate of growth continues, alternative capacity could reach a global market share of approximately 25 percent by 2020.
The report is optimistic about surplus in the year ahead. It says: “2014 portends to offer a reasonably competitive environment for business insurance. The industry has had a more profitable year in 2013 with the combined ratio falling to 95.8 through nine months from 100.7 in the same period last year. Industry wide return on average surplus rose through the first nine months to 9.5 percent from 6.5 percent during the same period in 2012.”
