LONDON, Nov 20 (Reuters) - Competition in the global insurance market is driving commercial rates down by as much as 15 percent, senior industry participants said on Thursday, as some look to new products such as cyber insurance to boost revenues.
Low yields in major markets have encouraged a move away from traditional insurance and towards insurance-linked securities such as catastrophe bonds, which offer a high return.
Some hedge funds have also started offering reinsurance to share the insurance burden of hurricanes and other costly natural disasters, and their aggressive approach has stolen business from traditional players.
A lack of natural disasters in recent years has also reduced global demand for insurance to protect property.
“This is a soft rate environment, with an average 10-15 percent decrease across the board,” Dominic Burke, chief executive of broker Jardine Lloyd Thompson told a conference. “It’s a good time to be a buyer of insurance.”
Many companies renew insurance policies in the fourth quarter while reinsurance renewals are concentrated in January.
Burke said even the aviation insurance market has seen price increases of only around 13 percent during the current renewal round, despite significant losses this year such as the downing of a Malaysian Airlines plane over Ukraine.
Darren Redhead, chief executive of specialist insurance fund manager Kinesis Capital Management, said alternative insurance products had sliced 15-20 percent from the profits of traditional players.
But other speakers at the conference said they saw a smaller decrease in insurance rates.
In the hunt for new business, underwriters in the specialist Lloyd’s of London market, where anything from rockets to body parts might be insured, have started to focus on protecting companies from the effects of cyber crime.
The British government is planning an industry-led working group to see how the insurance sector can help reduce the impact of a cyber attack on “critical infrastructure”.
“Cyber risk is going to be one of the major preoccupations of managers in all companies,” said Martin Bride, finance director of Beazley.
Some insurers are nervous about the potential size of claims in this new market, which they say has not yet been tested.
“Cyber is a buzzword but ... could be dangerous for some people,” said Alex Maloney, chief executive of Lancashire . “We are staying out of it.”
Reporting by Carolyn Cohn; Editing by Catherine Evans