WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE1 - PDF document

WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE1 MARKETPLACE REALITIES 2015 SPRING UPDATE WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTENTS INTRODUCTION ............................................................................................................................................. 2  Commercial Insurance Rate Predictions for 2015 3  Looking Forward, Looking Back ........................................................................................................... 4 MAJOR PRODUCT LINES  Property ..................................................................................................................................................... 5  Casualty ...................................................................................................................................................... 6  Workers’ Compensation ......................................................................................................................... 7  Auto Liability ............................................................................................................................................ 8  Employee Benets ................................................................................................................................... 9 PROFESSIONAL LIABILITY LINES  Cyber Risk .............................................................................................................................................. 10  Directors and Ocers ........................................................................................................................... 11  Employment Practices Liability 12  Errors and Omissions ............................................................................................................................ 13  Fidelity ..................................................................................................................................................... 14  Fiduciary .................................................................................................................................................. 15  Health Care Professional Liability .................................................................................................... 16 SPECIALTY LINES  Aerospace ................................................................................................................................................. 17  Construction ........................................................................................................................................... 18  Energy – Downstream and Upstream ................................................................................................ 19  Environmental ....................................................................................................................................... 20  Kidnap and Ransom (SCR) 21  Marine ..................................................................................................................................................... 22  Political Risk ........................................................................................................................................... 23  Surety ....................................................................................................................................................... 24  Terrorism ................................................................................................................................................ 25  Trade Credit ........................................................................................................................................... 26 We also invite readers to visit the Videos & Publications page of www.willis.com , where you will nd many other articles and studies of immediate and enduring value to risk managers, nancial executives and corporate governance stewards of every stripe. Marketplace Realities is updated semi-annually. EDITORIAL STAFF Matt Keeping | Jonathan Fried | Adam Weiss | Je Thomas © 2015 Willis North America Inc. All rights reserved. WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE2 MARKETPLACE REALITIES: NOT A CLIFF, BUT A WATERFALL Last fall in this space we said that insurance rates were possibly at the edge of a cli, even standing with one foot over the edge, about to plummet down. So far, they have not taken the plunge. They have, however, continued to drop in many cases, especially in Property. So we are not retreating from our dramatic geographic metaphor. But we will take this opportunity to update and perhaps correct it. Rates on most lines of business are meandering downstream, with some approaching white water rapids and others possibly headed for a waterfall. Here’s the key dierence between the cli and the waterfall: Going over a waterfall, unlike jumping o of a cli, is survivable. With policyholder surplus at record levels, we have little doubt about the resilience of the carriers navigating these turbulent waters. And now, please forgive us if we pursue the analogy a bit further. Some lines of business are seeing some uptick or attening – hitting sandbars or boulders in the riverbed that may slow the descent. Some lines of business – we’re thinking of Casualty and Executive Risks lines – could be primed to shoot the rapids and begin to pick up downward speed, yet for many buyers, depending on their industry, geography and loss history, rates may get caught against some rocks or some branches wedged in the water and may not actually fall at all. Like Nature herself, things can get a little chaotic out there. Overall, however, we anticipate a marketplace continuing to oer opportunities for buyers. With weather and other catastrophic losses remaining below average for another year, and capital hungry for a somewhat predictable return, we see the forces of supply and demand working like the melting snowpack after a rough, snowy winter: the rivers will be full and owing, bringing along most – though not all – riders. The challenge for the risk professional is to look beyond the river and take in the whole landscape. Risk management has always been about more than sitting on the river bank and watching the waters rise to ood-stage in a soft market or dry up like a creek bed during August in a hard market. Never has that been more the case than it is today. Why? Because risk proles are changing.  The threat of Cyber-related losses seem to be a matter of if, not when.  As the push for global markets clashes with the realities of political upheaval and war in many places on the planet, Political Risks are increasingly unavoidable.  Even if Nat Cat losses are down in the aggregate, the sense of a changing climate bringing an increased potential for widespread catastrophe in heavily populated areas is unavoidable. As risk proles change, so do the demands on risk professionals to bring more analytic exactitude and strategic depth to the decision-making process. Part of that is balancing the pressure to keep costs down and the need to maximize resilience for the risk transfer spend – in other words, to make sure that the organization is suciently protected so that its greater goals can be met. Rates heading downstream is good news, but that does not mean all the answers are simple or apparent. As always, we are ready to ride the roughest waters with our clients, ready to take whatever plunge or twists the marketplace currents and torrents may send their way. Matt Keeping Chief Broking Ocer Willis North America Senior Editor Marketplace Realities & Risk Management Solutions WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE Rate predictions by Willis subject matter experts relate to Property/Casualty business placed for clients larger than SMEs, other than in Employee Benets where clients of all sizes are included. COMMERCIAL INSURANCE RATE PREDICTIONS FOR 2015 INSURANCE PRODUCT RANGE OF CHANGE (%) Cyber for POS retailers (+12��5) E&O, poor loss experience Environmental: Combined with Casualty Environmental: PLL/EIL not marketed Kidnap & Ransom Employee Benets: Insured plans Casualty: Workers’ Comp in CA Employee Benets: Self-insured plans Cyber Fidelity Construction: XS Political Risks Casualty: Primary Construction: CIP Construction: GL Construction: WC Casualty: Workers’ Comp Employment Practices Liability D&O Fiduciary E&O, good loss experience Health Care Professional Surety Terrorism Construction: CIP (GL-only non-condo) Casualty: Umbrella & Excess Casualty: Auto Airlines Aerospace Construction: Builders Risk Environmental: CPL Environmental: PLL/EIL, new/mkt’d. renewal Marine Trade Credit Property: Non-CAT risks Property: CAT-exposed risks Environmental: PLL/EIL 5-year renewal -25 -20 -15 -10 -5 0 5 10 15 20 25 WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE4 LOOKING FORWARD, LOOKING BACK In this space, we put our predictions in a broader perspective. First, let’s look back at the previous issue and see how our crystal ball fared. If we exaggerated a bit in our nature metaphor (edge of a cli) we underestimated on a line-by-line basis the softening of rates. Rates fell a bit faster than we anticipated, as insurers continue to ght for market share across many lines of business. Second, let’s not let the trend replace the reality: the fact that rates are easing does not mean they are universally falling. Rates in some lines continue to creep upward, even if the rate of increase is declining. And of course the generalities for each line of insurance are only one of the marketplace realities buyers of insurance will face in the year ahead. The bigger part will be their own risk prole, loss history, appetite for risk, industry sector and strategy for managing risk. Here are some numbers to put our predictions into perspective. LOOKING BACK  In six lines we are now predicting notably softer rates than we were in the fall, including Property and most lines that make up Casualty.  In four lines, we are expecting slightly softer rates, for a total of 10 out of the 22 lines we highlight. LOOKING FORWARD  For the remainder of 2015, eight lines are expecting decreases:  Five lines are expecting increases:  The remaining lines are predicted to deliver a mix of small increases and decreases: For more color on how these trends aect your organization contact your local Willis representative or your Willis Client Advocate. Matt Keeping Chief Broking Ocer Willis North America Senior Editor Marketplace Realities & Risk Management Solutions Property Auto Energy Marine Health Care Professional Surety Terrorism Trade Credit Cyber Employee Benets Political Risks Fidelity Kidnap & Ransom Casualty (mostly at) Workers’ Compensation Aviation Construction Environmental Directors & Ocers Errors & Omissions Employment Practices Liability Fiduciary WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTACT DAVID FINNIS NATIONAL PROPERTY PRACTICE WILLIS NORTH AMERICA 404 302 3848 david.�nnis@willis.com PROPERTY  Buyers should continue to experience in 2015 what they experienced in 2014: erce competition among Property insurers as they ght for market share. However, we are keeping a watchful eye on the results because we can see this market softening even further.  Capacity – We see a market that can best be described as over-capacitized. Many insurers increased their CAT capacity in 2014 and refused to be marginalized by larger insurers. Insureds had many options in 2014 and are enjoying the same in 2015.  Loss Experience – Losses were benign in 2014. According to Swiss Re, worldwide Property losses totaled $34B in 2014, compared to $45B in 2013 and an average of $64B over the past decade.  Reinsurance – According to the latest report from Willis Re , rates were down 10% to 15% on January 1, 2015 treaty renewals. Capital markets continue to impact the reinsurance market as insurers have been able to replace the highest priced reinsurance capacity with this alternative capacity. According to recent reports, the combined ratios for top reinsurers averaged 87% compared to 86% in 2013. So despite falling rates (-15% to -20% in 2014) and expanded terms and conditions, the reinsurance market continues to make not insignicant returns, due mainly to the favorable loss experience.  Protability – Despite falling rates, most Property insurers should see a reasonable return on their respective portfolios, albeit not to the levels achieved in 2013. According to recent reports, the 2014 midyear combined ratios for the top insurers averaged 94.  Exceptions – The one sector that remains outside these trends is Habitational risk, especially those exposures close to the U.S. coastline. There are a limited number of insurers writing these risks on a primary basis and, accordingly, this sector remains challenging. PRICE PREDICTIONS NON-CAT -12.5% to -15% CAT -12.5% to -15% WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE6 CONTACT PAM FERRANDINO CASUALTY PRACTICE LEADER PLACEMENT NA 212 915 7928 pamela.ferrandino@willis.com CASUALTY – PRIMARY AND EXCESS  Capacity remains abundant and for some classes is increasing. The general eort by Casualty underwriters over the past few years to redene their appetite, cut back on certain classes of business (e.g., Workers’ Compensation) and/or raise attachment points is largely complete. The resulting increased protability is leading some insurers to aggressively grow their market share on some classes of business for some lines of coverage.  Despite increasingly favorable market conditions for insureds, underwriters continue to resist manuscripted endorsement language. Most generally insist on ISO language unless there are higher retentions or only incidental exposures are involved.  On primary Casualty programs, collateral requirements are continuing to ease and the majority of Casualty markets are now accepting sureties to satisfy part of collateral requirements. As the annual cost of collateral can sometimes exceed the cost of risk transfer, we are continuing to push markets to expand their acceptance of lower cost forms of collateral.  Due to the increased market options available for lead umbrellas, we are seeing no pressure to increase umbrella attachments.  Drones, also known as UAVs (Unmanned Aerial Vehicles), are becoming increasingly common as a cost-ecient business tool. In commercial applications UAVs are considered aircraft and the FAA expects UAV operators to adhere to the same regulations as aircraft operators. Liability coverage for UAVs is available in the Aviation insurance market and most UAV operators are purchasing Aviation Liability policies of $1M, although some markets can write $2M, $5M, or up to $10M if the risk prole is exceptional. In limited cases UAV operations can be included in CGL coverage. However, carriers may require higher retentions and sublimits.  The Internet of Things (IoT) is rapidly evolving and the Federal Trade Commission (FTC) estimates there will be more than 25 billion connected devices by the end of 2015. Most General Liability carriers are tightening their Cyber exclusions to clarify that if a Cyber event triggers the General Liability policy, coverage will only apply to third-party bodily injury or third-party property damage claims. This is a response to some policyholders seeking broader coverage for a Cyber event under the Advertising and Personal Injury sections of the standard CGL policy. These developing trends reinforce the value of broad, stand-alone Cyber insurance coverage and the importance of ensuring robust contractual indemnications and protections in supplier contracts to address these emerging exposures.  New York’s archaic Scaolding Law continues to create havoc for New York contractors and others parties, as “fall from elevation” losses temper carrier appetites for this exposure. While New York rates remain high, appetite and availability of cover are bigger issues than price. PRICE PREDICTIONS PRIMARY UMBRELLA & EXCESS -10% to �at WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTACT PAM FERRANDINO CASUALTY PRACTICE LEADER, PLACEMENT NA 212 915 7928 pamela.ferrandino@willis.com WORKERS’ COMPENSATION  Overall, combined ratios for Workers’ Compensation carriers are likely to continue improving in 2015, due to previous and some continuing rate increases, and some improvement in medical ination trends.  Several states remain challenging Workers’ Compensation environments: New York, Massachusetts, Pennsylvania, Illinois and California.  An emerging concern for 2015 is the potential for erosion of exclusive remedy doctrines in certain states, including Florida, Oklahoma and Missouri.  While the full impact of the Aordable Care Act on Workers’ Compensation cannot yet be measured, industries that are hiring more part-time employees continue to see increases in loss frequency that are typical with newer employees. In states like California with sizable agriculture, manufacturing, hospitality and retail employee populations, this dynamic is more visible. As increased frequency will negatively impact an employer’s experience mod, this trend may increase Workers’ Compensation premium. PRICE PREDICTION -2.5% to +2.5% , up to +8% in California WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE8 CONTACT PAM FERRANDINO CASUALTY PRACTICE LEADER PLACEMENT NA 212 915 7928 pamela.ferrandino@willis.com AUTO LIABILITY  Large auto eets with good loss experience are beneting from aggressive marketing, resulting in modest rate reductions. However, for large eets with unfavorable loss experience or very dicult exposures (e.g., long haul and/or heavy trucks) there continues to be upward pressure on rates and deductibles.  Facultative reinsurance pricing has not softened for the Auto Liability market and underwriters that rely on facultative reinsurance to support their pricing may be less able to oer the most competitive terms.  Smaller auto eets, which tend to be written on a guaranteed cost basis, are not seeing the same downward rate trends as large eets.  Fortunately, umbrella underwriters are not asking for higher attachment points for risks with large eets and heavy trucking exposures. Again, companies with poor loss experience are still facing pressure on attachments and rate increases.  Carriers that oer both primary Casualty and umbrella products are better prepared to oer higher primary limits than they were last year.  Both the primary and excess markets recognize the benets of investment in advanced safety technology and these safety advancements are rapidly developing. Currently, the National Highway Transportation Safety Administration is reviewing three categories of safety technologies: crash avoidance systems; vehicle-to-vehicle (V2V) communications – not human communication, but safety data directly communicated from one vehicle to another vehicle; and autonomous vehicles, also known as self-driving vehicles.  Many companies with large auto eets are beneting from reconguring their towers to introduce shorter layers in their lead umbrella and taller quota shared layers in their excess; a competitive combination of domestic, London, Bermuda and global capacity is yielding the best terms. PRICE PREDICTION -10% to �at WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTACT JON TREVISAN DIRECTOR OF PLACEMENT WILLIS HUMAN CAPITAL PRACTICE 617 351 7528 jon.trevisan@willis.com EMPLOYEE BENEFITS  The Patient Protection and Aordable Care Act (PPACA) will increasingly impact employers in the years ahead. Employers face new reporting requirements and additional employee disclosure and notice requirements.  The Cadillac Tax, eective in 2018, is expected to impact a signicantly larger number of employers than originally anticipated due to the increasing cost of health care. Employers do not intend to pay the excise tax and are beginning to take steps to reduce existing coverage to avoid the Cadillac Tax thresholds. Many employers believe taking incremental steps to reduce coverage over the next few years is preferable to waiting until 2017 to make severe plan changes.  Employers continue to take aggressive steps to stem the rising costs of health care: Shifting costs to employees and requiring even greater contribution levels to cover dependents. Spousal surcharges are becoming more common. Managing the health of populations through wellness programs, with increasing focus on high-risk and high-cost populations. Self-insuring risk for larger employers. New products are making self-insuring a more reasonable option for smaller employers. Implementing a dened contribution approach to funding benet programs. The move to dened contributions is often used in conjunction with a migration to a private exchange and/or consumer directed plans, including high-deductible options.  The Supreme Court is expected to rule in June on whether the IRS exceeded its authority in making federal subsidies available for use in federally run public exchanges. Depending on the outcome of this decision, the landscape for public exchanges could change signicantly.  While the adoption of private exchanges has been modest in 2014, employer interest remains high. Utilization is expected to rise in 2015 and beyond. PRICE PREDICTIONS SELF-INSURED +5% to +6% FULLY INSURED +8.5% to +9.5% WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE10 CYBER RISK  Cyber renewals saw primary premium increases of up to 10%, with additional increases on excess layers. Organizations with point-of-sale (POS) exposure are seeing 10% to 100%+ increases in primary premiums and additional increases in the excess layers due to paid claim activity. Smaller organizations (those with revenues less than $1B) are typically on the lower end of the premium ranges referenced above.  With Cyber breaches becoming alarmingly common and increasingly severe, the demand for stand-alone Cyber policies is dramatically rising.  Despite reduction in capacity by some carriers, available limits in the marketplace are approximately $400 million.  In addition to increasing premium for POS-exposed businesses, underwriters are requiring additional underwriting information, including conference calls with third-party security experts. Additional actions taken include increasing retentions, reducing capacity and exiting certain sectors.  First-time buyers (except POS retailers) will continue to see a marketplace with favorable terms, conditions and pricing, but not as favorable as in the past, given the shifting competitive environment and paid losses. In 2014, 761 unique cyber breaches led to theft or compromise of 83,176,279 individual records. Health care providers, service providers and retailers accounted for most of the breaches. Preventable breaches (caused by failure to encrypt data storage devices) continue to decrease, while breaches involving hackers/organized crime and rogue employees have increased. As a result, claim severity has spiked dramatically. Eleven of the top 15 largest breaches of all time occurred in 2014.  Underwriters are continuing to manage the cloud exposure, given the potential impact of a catastrophic cloud incident that can involve multiple insureds. Some underwriters are managing the exposure through policy language and aggregation of limits.  Cyber policies in Europe and other countries are seeing dramatic growth. For most non-U.S. corporations without U.S. operations, Network Business Interruption coverage has oered greater value than Data Privacy Liability coverage, which may change as reputational and governmental oversight increases.  Carriers have paid regulatory nes and penalties assessed against insureds following data breaches, particularly in the retail and health care sectors. Carriers have also made loss payments involving PCI nes and penalties. PRICE PREDICTIONS RENEWALS (NON-POS RETAIL) Flat to +5% RENEWALS FOR POS RETAILERS +10% to +125% FIRST-TIME BUYERS Competitive market conditions CONTACT GEOFFREY K. ALLEN NATIONAL E&O AND CYBER PRACTICE 212 915 7951 geoffrey.allen@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE DIRECTORS AND OFFICERS (D&O)  Ample Capacity Yields Opportunity: Even with several large recent D&O settlements ( e.g., $970M, $275M and $137.5M), capacity continues to provide opportunities across most market segments and industries. For example, London and Bermuda are coming back into U.S. FI Liability business in a big way. Competition presents opportunities to improve terms or move to a preferred carrier. Public Companies: For clean primary, at is more common, with savings coming from excess. First-quality primary carriers are continuing to seek rate increases for many accounts. PNP: Private companies have seen less upward pressure on rates , although rate increases are likely for health care companies, homeowner/condominium associations, educational institutions and nonprot entities. Financial Institutions: We are seeing small decreases on the primary with slightly greater savings on excess. For companies that have yet to see relief from credit crisis increases, e.g., nancial guarantee companies, rate decreases could be as large as 25%. Excess Side-A: Rate is very competitive, with no sustainable oor in sight.  Interesting Carrier Behavior: Carrier analytics may impact how specic portfolios, industries and segments are viewed – sometimes resulting in surprises.  M&A: M&A activity yields D&O claims. Expect pricing and term pressure for risks with signicant M&A activity.  Top Non-Financial Boardroom Concerns: Reputation risk, cyber security, vendor/supply chain and regulatory compliance.  Regulatory/Enforcement: Expect more, particularly from the SEC, driven by advances in data analytics and mandated rulemaking (Dodd-Frank and the JOBS Act). SEC enforcement will be redoubled in traditional areas such as accounting fraud. Cyber and corruption remain key focus areas, too.  Something’s Gotta Give — Macro-Environmental Drag Likely to Weigh Heavily on U.S. Stocks, Increasing D&O Risk: Heavy environmental headwinds could make lofty expectations reected in today’s valuations tough to achieve. Fed-Up? The Federal Reserve will raise rates at some point. Jitters around timing impact volatility. Without higher rates, concerns over the Federal Reserve’s ability to address the next crisis suggest that a downturn may have a broader, more severe impact. 52-Week Highs: Stock markets around the world are at or near record highs. Higher stock prices could mean bigger drops on bad news – big drops often attract securities suits and escalate severity.  Eective Global Coverage: Public and private companies continue to evaluate and, in many cases, purchase international D&O policies in conjunction with their U.S. policies. Carriers have continued to innovate and improve oerings and services. PRICE PREDICTIONS OVERALL -5% to +5% PUBLIC COMPANY – PRIMARY -5% to +5% PUBLIC COMPANY – EXCESS -5% to -15% (includes Side-A) PRIVATE COMPANIES Flat to +7% NONPROFIT ENTITIES Flat to +10%, (life science, +5% to +10%; health care: +10% to +15%) FINANCIAL INSTITUTIONS Flat to -5% (Excess -7% to -10%) CONTACT ROB YELLEN D&O PRODUCT LEADER WILLIS FINEX NORTH AMERICA 212 915 7919 robert.yellen@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE12 EMPLOYMENT PRACTICES LIABILITY (EPL)  EPL capacity remains plentiful, with overall capacity of more than $800M.  Severity and frequency of claims decreased, except in California, Texas and Florida, where single plainti retaliation and discrimination claims remained consistent or increased.  On average, primary rates are -3% to +3% (unless loss experience or exposure base dictated a greater increase). The decrease in claim frequency and severity has made it dicult for insurers to justify greater increases across their books, and indeed with ample capacity we are seeing small increases in many cases. For California buyers, however, some rate increases reached double digits and carriers continue to seek retention increases. For nancial institutions, large-scale claim settlements made insurers more conservative in setting rates.  Wage & Hour exposure/coverage remains a major issue for many buyers. Anticipated amendments to the Fair Labor Standards Act in 2015 may further increase the exposure. Bermuda and London insurers continue to demonstrate exibility by oering blended Wage & Hour/EPL policies in addition to the stand-alone product. This approach has attracted more buyers.  The total number of charges of discrimination led with the Equal Employment Opportunity Commission (EEOC) in scal year 2014 was down nearly 5,000 from scal year 2013. The EEOC attributed the decrease to the temporary governmental shutdown in October 2013. However, the improving economy may have also been a factor.  The EEOC is expected to continue to be proactive in its systemic initiatives, including employment background checks, pregnancy-related accommodations and the protection of lesbian, gay, bisexual and transgender individuals in the workplace under Title VII.  Retaliation charges hit an all-time high of 42.8% of all charges.  The National Labor Relations Board (NLRB) is continuing its campaign against companies with social media policies that may infringe on the rights of employees. While social media EPL claims have not increased as anticipated, many companies are implementing relevant policies and procedures as part of their overall EPL risk management strategy.  Recent initiatives in the U.K. and Germany to improve the percentage of women on boards and in leadership positions may improve the EPL risk proles of global companies. Meanwhile, companies are advised to implement adequate policies and procedures to address potential reverse discrimination claims. PRICE PREDICTIONS OVERALL -3% to +3% (at expiring retentions); California: +5% to +15% (retention increases) LARGE GLOBAL COMPANIES -3% to +3% on primary; -3% to -5% on excess MID TO LARGE DOMESTIC FIRMS -3% to +3% on primary; -3% to -5% on excess PRIVATE AND NONPROFIT ENTITIES Flat to +10%; (primary and excess) SMALLER EMPLOYERS (00 EMPLOYEES) +5% to +15% (primary and excess) CONTACT ADEOLA I. ADELE NATIONAL EPL PRODUCT LEADER WILLIS FINEX NORTH AMERICA 212 915 8889 adeola.adele@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTACT GEOFFREY K. ALLEN NATIONAL E&O AND E RISK PRODUCT LEADER 212 915 7951 geoffrey.allen@willis.com ERRORS AND OMISSIONS  Competition from new carriers and traditional carriers seeking to expand market share is limiting upward pressure on rates. We expect 2015 to continue along similar lines.  The market seems to be considering the eect of large data/privacy losses from the retail sector and other large technology losses. Higher quotes have been issued by some carriers, but the long-term eects of these events are still undecided. The losses have mainly aected Cyber for the retail sector and the increases have been in the 15% to 20% range in lower layers of retail Cyber towers.  Industry sectors at risk for large claims and litigation will continue to see upward pressure on rates. Large technology companies and companies with new media services, for example, could see increases up to 20% due to expanding global privacy laws.  Technology service providers are now more routinely being asked to provide higher evidence of insurance coverage.  Accounts with poor loss experience are facing related price and deductible increases as well as possible changes in wording.  For accounts with good loss experience or a signicantly improved risk control regimen, competition can be robust and rates have been stable as carriers seek to maintain market share.  Excess markets have seen more competition due to increased capacity and rates have been at, with savings sometimes available.  Wording enhancements are still available. Insurers continue to add or enhance Network Security and/or Privacy Liability coverage and provide broader terms for First Party Cyber exposures. Companies with manuscript wording can expect to have their coverage improved.  Most insurers are standing rm on deductibles.  Authorized global E&O limits are approximately $850M. Typical insureds should be able to buy from $500M to $600M. Insurers continue to closely manage their capacity, often reducing their capacity commitments, but capacity reductions have been oset by additional players entering the marketplace. PRICE PREDICTIONS GOOD LOSS EXPERIENCE -5% to Flat POOR LOSS EXPERIENCE OR DIFFICULT INDUSTRY SECTORS +5% to +20% E&O CAPACITY$800 ,000,000 $7 00,000,000 $600 ,000,000 $500 ,000,000 $400 ,000,000 $300 ,000,000 $200 ,000,000$100,000,000$02009 2010 2011 2012 2013 2014 2015 (pred.) WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE14 FIDELITY  While the 2014 Surety Association results will not be released for another several months, expectations are that the majority of Fidelity markets will reect satisfactory prots.  Capacity remains strong for mid-market clients and in the excess market. For the Fortune 1000, the arrival of new carriers late last year, with very senior Fidelity underwriting managers, is likely to have a notable impact, adding much needed primary capacity.  Technology-related losses continue to plague insureds, particularly social engineering losses – schemes that take advantage of what is often the weakest link in a company’s fraud protection: human nature. Unfortunately, existing Crime policies oer limited if any coverage for these losses. Numerous Crime markets, however, are now crafting coverage to address losses resulting from these schemes, usually based on an outside individual’s ability to impersonate an employee, vendor or customer through the use of email and other social media to fraudulently induce employees to wire funds to the thief’s bank account.  Underwriters have not shown any signs of reducing the breadth of coverage aorded by the market in recent years and we do not expect this to change in the near future. Financial institutions in many cases remain critical of the dated language aorded by the majority of policies, particularly for coverage surrounding technology exposures. Select markets, however, have become responsive to recommended policy changes.  As 2015 progresses we anticipate the following: Plenty of capacity for mid-sized account and excess policies Large and regional nancial institutions will continue to nd a limited number of accounts prepared to write primary policies Pricing will remain at to +5% barring any material changes in the basic rating data PRICE PREDICTION FLAT TO +5% CONTACT STEPHEN LEGGETT NATIONAL FIDELITY PRODUCT LEADER 212 915 7901 stephen.leggett@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE FIDUCIARY  Fiduciary Liability capacity remains constant, keeping rates mostly at. Although exposure trends suggest Fiduciary may soon feel loss pressure, markets continue to look to Fiduciary to diversify their overall Management Liability books. Also, the trend toward multiyear deals has continued.  Primary Fiduciary Liability placements should continue to see stable pricing in 2015.  Excess may see modest price relief.  Financial institutions should see stable pricing in 2015. However, due to concerns over fee and/or limited investment options claims, asset managers may experience underwriting scrutiny if they oer their proprietary investment vehicles as plan oerings.  The impact of Fifth Third Bancorp v. Dudenhoeer and the potential impact of Tibble v. Edison International are being closely watched. Dudenhoeer has the potential to substantially increase loss severity while modestly increasing frequency by eliminating the “presumption of prudence.” Tibble is one of 13 class-action lawsuits led in the past eight years that have accused U.S. companies of failing to act in the best interest of employees who participate in their 401(k) plans largely by failing to monitor excessive fees, favoring some high-cost retail mutual funds over lower-cost options and funneling employee savings into investment products managed by aliate companies. A victory for the plaintis in the U.S. Supreme Court has the potential to substantially increase Fiduciary claims/losses. Rate movement, however, is not anticipated unless carriers experience material adverse development.  On the issue of settlor liability coverage, the majority of carriers now oer language explicitly acknowledging the coverage. PRICE PREDICTIONS OVERALL -5% to +5% COMPANIES WITH LARGE CONCENTRATIONS OF THEIR STOCK IN BENEFIT PLANS -3% to +7% COMPANIES WITHOUT/LIMITED COMPANY STOCK IN THEIR PLANS -3% to -7% (on excess layers) ESOP-OWNED FIRMS +5% to +10% PRIVATE AND NONPROFIT ENTITIES -3% to+3% CONTACT ROB YELLEN FIDUCIARY PRODUCT LEADER WILLIS FINEX NORTH AMERICA 212 915 7919 robert.yellen@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE16 HEALTH CARE PROFESSIONAL LIABILITY  The Health Care Professional Liability (HPL) market will continue to atten through 2015, with at to low single-digit decreases at typical renewals. Accounts with good loss experience that are not marketed annually may occasionally see low double- digit reductions. HPL pricing is also driven by limits purchased, program structure and attachment points.  This line remains one of the most stable and protable P&C lines, which can be expected to continue through 2015. The HPL industry combined ratio improved slightly in 2014.  HPL is a very competitive line and new entrants have helped keep pricing low.  Loss frequency remains at historically low levels (with perhaps a slight uptick). Severity is increasing but is actuarially predictable and thus far has not materially aected overall underwriting results. The number of large verdicts must be watched as one of the sector’s few negative factors.  The insurance marketplace is shrinking, with fewer buyers and the growth of captives and risk retention groups (RRGs) in recent years.  Another positive turn for buyers was the defeat of the recent California ballot initiative (Proposition 46). The defeat upheld the long-standing Medical Injury Compensation Reform Act (MICRA) laws.  Due to the long tail of HPL, health care reform has not yet impacted claims. But changes wrought by the Aordable Care Act will shape malpractice risk and underwriter response , as many health care organizations manage ACA implementation and clinically integrate their organizations.  Many buyers may need to adjust terms and conditions to address such evolving risks as Cyber crime and pay-for-performance, as well as Executive Risks.  Regulatory risk coverage is available and, while the retentions are signicant and the pricing can be high, some buyers are purchasing these policies to address a meaningful risk in the era of reform.  High merger and acquisition activity by hospitals and hospital systems is continuing through 2015. This has translated into fewer buyers, especially in the hospital and physician segments, which historically have generated large amounts of premium. There is some growth in the long-term care, miscellaneous facility, allied health professional and managed care segments. PRICE PREDICTION -5% TO FLAT CONTACT FRANK CASTRO PRACTICE LEADER NATIONAL HEALTH CARE PRACTICE WILLIS NORTH AMERICA 213 607 6304 frank.castro@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE AEROSPACE  2014 saw signicant and high-prole losses. These losses did not reect an overall deterioration in industry safety but have impacted some insurers substantially and created a divided market as a result. Rates have not risen as much as many were expecting.  Overall airline market losses were above the sector’s ve-year average. Excluding these exceptional losses, however, the industry safety experience remains good.  A market divided by loss experience is creating diering viewpoints from insurers regarding premium changes.  Given abundant capacity, it remains to be seen what level of premium can be achieved by carriers seeking to balance loss levels.  Economies of scale will continue to secure better-than-average results for the largest programs.  The Aerospace (non-Airlines) sector continues to see consistently soft market conditions.  Corporate Aviation continues to see competition driving down premium volumes and bringing improvements in coverage. PRICE PREDICTIONS AIRLINES Flat to +10% AEROSPACE -10% to �at CONTACT STEVE DOYLE GLOBAL HEAD OF SALES AND MARKETING, TRANSPORTATION GB WILLIS AEROSPACE +44 203 124 7208 steve.doyle@willis.com JOHN ROOLEY CHIEF EXECUTIVE OFFICER GLOBAL AEROSPACE +1 778 994 6086 rooleyje@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE18 CONSTRUCTION  Construction activity in the U.S. continues to grow in early 2015 with signicant activity in oce, multifamily/mixed-use projects and some growth in logistics. Heavy highway work lags somewhat although mega projects in this space are having a positive impact for the largest rms. The recent volatility in fuel prices has been both a blessing and a curse as costs have moderated, but energy-related projects have immediately slowed due to uncertain returns.  Insurance pricing/rates continue to be competitive with a few exceptions. In Workers’ Compensation in some states, the market is a bit rmer but, generally, for good loss experience, pricing is at.  Property – We expect 2015 to continue to oer opportunities for price improvements, even in high CAT areas, especially in Builders Risk and Marine coverages (both water and inland).  General Liability – In early 2015 pricing is at, with some decreases for good loss accounts. In a few jurisdictions, such as New York, the market continues to be much more dicult due to local laws.  Controlled Insurance Programs (CIPs) – CIP pricing in 2015 should be relatively at with some regional exceptions. Multifamily construction continues to attract investment dollars, creating tempting revenue opportunities for contractors and insurers alike in 2015. However, the reality of condominium conversion is forcing builders to balance coverage and cost with the prospect that a low-cost program today may not respond if the project is converted tomorrow, exposing their future practice programs. Market appetite for multifamily project insurance remains strong in the excess and surplus lines sector, while the admitted/standard market remains very cautious. Concerns for certainty of coverage, the erosion of historical contractual protections, growing use of unique delivery approaches, and lender requirements continue to generate interest in project insurance. Soft Workers’ Compensation rates and concerns for long-term collateral obligations are expected to continue owner interest in General Liability-only CIPs.  Workers’ Compensation – This line remains competitive subject to state-by-state rate and benets rules.  Excess/Umbrella Liability – More capacity is being seen, particularly in the lead excess layers, which is creating a positive rate environment.  Auto Liability – This line remains at in early 2015.  Professional Liability – A competitive marketplace continues due to new capacity. The big news here is the merger of Catlin and XL Insurance, though they are still operating as competitors. PRICE PREDICTIONS GENERAL LIABILITY Generally �at EXCESS LIABILITY Flat to +5% WORKERS’ COMPENSATION Flat (some increases on guaranteed cost deals) BUILDERS RISK Flat to -10% CONTROLLED INSURANCE PROGRAM (CIP) Flat (-5% to -7% for GL-only non-condo risks) CONTACT KAREN A. REUTTER, CPCU, CRIS, ARM EXECUTIVE VICE PRESIDENT DIRECTOR, CONSTRUCTION INSURANCE WILLIS NORTH AMERICA 763 302 7113 karen.reutter@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE CONTACT ROBIN SOMERVILLE GLOBAL COMMUNICATIONS DIRECTOR, NATURAL RESOURCES +44 20 3124 6546 somerviller@willis.com ENERGY – DOWNSTREAM  Capacity has increased again – now up to $5.5B for international risks and $4.3B for North American risks.  New insurer start-ups have increased the competitive pressures.  The sector saw some notable losses in 2014 but none to upset the overall softening dynamic.  Business Interruption losses continue to constitute a signicant proportion of the overall loss total.  Lower oil prices will reduce Business Interruption values, while reduced demand for rened products will also drive premium out of the market.  Lloyd’s statistics still point to overall portfolio protability, although this market is not as signicant as it has been.  Downstream underwriters have little choice but to accept macro-economic conditions, including the impact of protable insurance companies armed with increased capacity.  Rates will continue to decline, and we see little chance of any return to “technical” rating.  Some discipline still remains with regard to retention levels and policy wordings, but we have seen increases in sub-limits for coverages such as Contingent Business Interruption and Onshore Terrorism. PRICE PREDICTION ACCELERATED SOFTENING ENERGY – UPSTREAM  Capacity is at a record high: nearly $7B.  The sector’s loss record for 2014 has been extremely good, with only one loss recorded above $100M. This has made 2014 one of the most protable on record.  As a result we are now seeing much softer market conditions, with competition in all areas for premium income and market share. Following insurers are showing a much greater willingness to lead business in their eorts to secure this twin objective.  This dynamic will apply in particular to Gulf of Mexico Windstorm risk, as yet another hurricane season has come and gone with no upstream energy losses recorded.  We expect premium levels to come under severe attack from the eects of lower oil prices and reduced risk management budgets.  Buyers at renewal face a decision: stick with trusted insurer partners or move to more competitive markets. PRICE PREDICTION ACCELERATED SOFTENING – EVEN MORE THAN DOWNSTREAM WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE20 ENVIRONMENTAL  Combined Form – Contractors Pollution or Site Pollution + General Liability New carriers are testing the Combined Form market by adding EIL/PLL coverage to existing General Liability and Excess programs rather than developing stand- alone policies. Combined forms are seeing the largest rate increases in the Environmental stable of products, although the increases are not expected to be as steep as in recent years. Carriers remain reluctant to oer umbrellas over their competitors’ primary programs. Only certain carriers are oering holistic all-lines programs.  Claims Environmental claims have been rising 20-30% each year since 2009. Insureds are becoming more aware of the reporting and cooperation conditions in their Environmental policies, positively impacting claim resolution. Mold claims keep increasing, with claims commonly exceeding retentions. Environmental claim management is becoming a key dierentiator in the placement decision. Mature carriers are continually evaluating and re-underwriting their book of business to increase protability – especially with respect to the Combined Form products. PRICE PREDICTIONS CONTRACTORS POLLUTION LIABILITY -10% to �at SITE POLLUTION LIABILITY (PLL/EIL) – RENEWING FR�OM 5 YEAR PROGRAMS -25% to �at SITE POLLUTION LIABILITY (PLL/EIL) – NEW BUSINESS AND MARKETED RENEWAL -10% to �at SITE POLLUTION LIABILITY (PLL/EIL) – NON-MARKETED RENEWAL Flat to +10% COMBINED ENVIRONMENTAL + CASUALTY +10% to +15% CONTACT RICH SHELDON ENVIRONMENTAL PRACTICE LEADER 610 254 5625 richard.sheldon@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE KIDNAP AND RANSOM (SCR)  Rates in the U.S. Special Risks (Kidnap & Ransom) market remain stable, with higher cost for companies with signicant exposures in the hot spots around the world.  Buyers with exposures in the U.S. and low-risk overseas locations can expect at renewals.  The risk of kidnap for ransom to employers, business travelers and families has continued to grow over the last 12 months. Persistent fragility throughout the Middle East and North Africa continues to increase risks to sta in Libya, Egypt, Yemen, Lebanon, Syria and Iraq. While terrorist groups use kidnap for political leverage, nancially motivated kidnapping is on the rise. In some cases kidnappers fuse political and nancial demands, complicating cases. The kidnap and terrorism threat to foreigners from militant group al-Shabaab remains high in Somalia and in parts of neighboring Kenya. In Ukraine , kidnapping has worsened and could spread if civil unrest and conict continue. In Latin America , kidnapping remains an important modus operandi for cartels, organized groups and opportunist criminals. Mexico continues to register the greatest overall number of kidnap cases, followed by Venezuela. The FBI dealt with 199 kidnap cases involving U.S. citizens in Mexico last year. Threat levels are also high in Colombia, Brazil and other Latin American countries. As before, the vast majority of incidents target local middle-class workers or professionals and their dependents and are typically of short duration. Express and virtual kidnapping are becoming more common. In Asia , Islamist and purely criminal abductions are a high threat in Afghanistan and Pakistan. With the international security force’s departure, political tensions are likely to further stoke lawlessness in Afghanistan. The high kidnap threat to middle class local nationals in Bangladesh and India persists; however, cases involving foreign nationals remain rare. Visitors and residents in the Philippines remain exposed to criminal abductions in the capital, Manila. The threat of kidnap by Islamist insurgent groups remains high in southern islands such as Mindanao. In Sub-Saharan Africa , the presence of Boko Hara in northeast Nigeria and the consistently high level of kidnap throughout the country make Nigeria increasingly dangerous. Kidnap rates in Lagos and the Niger Delta states continue to worsen in line with rising economic development, wealth disparity and an increase in the number of criminal gangs. In the Sahel, a decline in the number of tourists and NGO/aid workers that formerly made up the majority of kidnap victims is accounting for fewer cases. Nevertheless, the risk from Al-Qaeda in the Islamic Maghreb (AQIM) and aliated Islamist organizations remains high. In Kenya, the risk of kidnapping continues to worsen in border areas with Somalia. Financially motivated attacks remain a risk in the urban areas of Nairobi and Mombasa. PRICE PREDICTION FLAT TO +10% CONTACT MICHAEL DANGLER SPECIAL CONTINGENCY RISKS 212 915 8086 michael.dangler@scr-ltd.co.uk PHILIPP SEEL SPECIAL CONTINGENCY RISKS 212 915 8040 seelp@scr-ltd.co.uk NICHOLAS BARRY SPECIAL CONTINGENCY RISKS 212 915 7857 nicholas.barry@scr-ltd.co.uk CONCETTA ESPOSITO SPECIAL CONTINGENCY RISKS 212 915 8106 concetta.esposito@scr-ltd.co.uk WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE22 MARINE  Rating levels have been softening for some time and there is currently no sign of change in that trend, as the supply of capacity comfortably exceeds demand.  Hull & Machinery Aside from the surfeit of capital available to insurers, insurers perceive Hull insurance to be uncorrelated to the classic catastrophe risks, such as earthquake, hurricane and ood, in their non-marine portfolios. So, Hull insurance oers diversication. Another factor behind the soft H&M market is the relatively benign recent loss experience. Most marine hull underwriters are still reporting reasonable prots. Indeed, the softness of the H&M market is such that it is doubtful whether any more major marine casualties, such as the Costa Concordia, would be sucient to turn the tide in underwriters’ favor.  Cargo Continued insurer competitiveness is demonstrated through increasing limits, falling deductibles and broader coverage – while maintaining prot commissions – without increases in pricing. Certain classes where losses are more common are seeing increases in premium. Competition remains erce for new business, and the right account can still achieve signicant premium reductions when remarketed. Renewals continue to attract reductions.  Other Key Highlights Continued increases in international trade volumes are relieving some of the pressure on insurers. Insurers are looking for increases or at renewals on CAT-exposed accounts. Deductibles are generally stable. Continued global political unrest exposes potential gaps in cover for insurrection, terrorism and political violence. Insurers are often willing to provide extended cover and increased limits in order to retain clients. PRICE PREDICTIONS CARGO -10% to �at HULL -10% to �at MARINE LIABILITY -10% to �at CONTACT CHRIS BHATT GLOBAL SALES DIRECTOR MARINE AND TRANSPORTATION +44 20 3124 6560 chris.bhatt@willis.com 23WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE POLITICAL RISK Our price prediction for Political Risk is at to +2%. There are several locales where the risks are signicant. Iraq – Violence persists in Iraq due to the growing conict with the Islamic State (ISIS), which now involves French forces. A recent video shows captured Kurdish Peshmurga soldiers in cages. The political risk insurance market remains essentially closed to Iraqi exposures. Russia – Tension remains high between the West and Russia, with the U.S. calling the Kremlin’s actions in Ukraine “craven,” Moody’s downgrading Russian bonds to junk status, and the U.S. and EU threatening further sanctions. Concern is growing about economic crises and Russian retaliation against foreign rms. Markets are still generally reluctant to take on new Russian exposures, and existing programs with Russia are renewed on a case-by-case basis. Former Soviet States – Some experts foresee Russia testing NATO resolve and employing their hybrid warfare tactics of supporting Russian-speaking populations in the Baltic States, Moldova, Georgia, Belarus, Kazakhstan and elsewhere. Markets, reluctant in these countries, appear open in other former Soviet satellite states. Ukraine – Markets are essentially closed to risk in eastern Ukraine and look at risk in western Ukraine on a case-by-case basis, although some markets cannot write any new Ukraine risk regardless of location within country. Brazil – President Rousse faces a falling real , threats of a sovereign credit downgrade, fallout from corruption investigations and growing discontent over tax increases and austerity measures. Electricity and water shortages may also trigger instability in coming months. Argentina – The country is struggling with a recession, ination upwards of 40% and a drop in international reserves. Pending the outcome of the 2015 election, companies could anticipate protectionism, price controls and civil unrest. Reports of currency inconvertibility/non-transfer and continuing interventions in the economy, including the possibility of further renationalization, will continue to discourage investment in many key sectors. China – Xi Jingping’s crackdown on corruption is welcomed by most in the investment community; however, there is concern about conicts between the provinces and the central government. Furthermore, China’s GDP growth is slowing, and there is risk to the regime in the form of middle class social unrest, as seen in Hong Kong. Mexico – The government’s limited success with its crackdown on cartel leaders may have been short lived. Coca-Cola suered a kidnapping of employees and may even pull out of the country. This could trigger an exodus, which would be dangerous for the economy and stability of the entire state of Guerrero. Eorts to privatize Pemex and other sectors continue. Turkey – Embattled by an overow of refugees from Syria, Kurdish separatism, and the growing threat of ISIS, Turkey faces serious challenges. Some experts have asserted that President Erdogan’s increasingly authoritarian regime could be emulating Vladimir Putin’s in Russia. PRICE PREDICTION FLAT TO +2% CONTACT JOHN LAVELLE NORTH AMERICA POLITICAL RISK PRACTICE LEADER 212 915 8256 john.lavelle@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE24 SURETY  The Surety market remains extremely competitive as new players enter. Sureties are aggressively pursuing new business as the construction economy continues its slow recovery. The competitive environment is pushing sureties to focus on middle market contractors and commercial surety.  2015 forecast: moderate topline premium growth for the industry, with a potential uptick in claim frequency as the economy accelerates.  The Surety industry continues to enjoy strong prots and we see the trend continuing in 2015. Through the third quarter of 2014, the Surety & Fidelity Association of America (SFAA) reported a direct loss ratio of 15.5%; it is projected that 2014 will be the eighth consecutive year of protability (full-year 2014 results are expected in May 2015).  Possible points of contention in contract negotiation surround extended warranties, consequential damages and other onerous conditions that owners are asserting with contractors. Contractor prot margins, meanwhile, remain under pressure, narrowing their margin for error.  Consistent with previous economic cycles, the current increase in construction activity will put pressure on contractors’ working capital, which will trickle down to subcontractors. This will lead to the potential of more subcontractor defaults, underscoring the need for general contractors to emphasize subcontractor prequalication and to consider requiring Surety bonds from subcontractors or utilizing a subcontractor default insurance product. It is more important than ever for general contractors to have a dened plan to mitigate the risk associated with subcontractor defaults.  While conventional Surety bonds continue to support billions of dollars in P3 projects, lenders remain focused on having more liquid security than traditional Surety bonds typically oer. Several carriers continue to work towards addressing this demand for liquidity with the rating agencies and lenders, but so far we have seen very little traction. PRICE PREDICTIONS CONTRACT -5% to �at COMMERCIAL -5% to �at CONTACT C. SCOTT HULL EXECUTIVE VICE PRESIDENT HEAD OF SURETY WILLIS GLOBAL SURETY 205 868 1364 scott.hull@willis.com 25WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE TERRORISM  The clianger extension of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA, also referred to as TRIA) in January caused widespread concern throughout the insurance marketplace, triggering demand for alternative solutions to embedded Terrorism coverage.  The risk of a signicant terrorist attack has increased, with the demonstrated nancial strength and global reach of terrorist organizations such as ISIS , Boko Haram and Al Qaeda. Increasing evidence of lone wolf-style attacks is making prevention harder to monitor and targeting more indiscriminate.  The stand-alone Terrorism insurance market continues to oer creative and cost-ecient alternatives to TRIPRA-supported programs and can theoretically provide more than $3.5B per risk.  A focal point for 2015 will be on the growth of new risk transfer programs to address, in particular, the consequences of non-damage Business Interruption, including Loss of Attraction, Threat and Workplace Violence, as well as rst-party property damage and consequential loss resulting from cyber attacks.  With TRIPRA extended, 2015 will see a resurgence in the use of captives to access TRIPRA indemnities, which facilitate access to coverage for catastrophic terrorism events otherwise unavailable in the traditional Property and Casualty marketplace.  Ongoing renement and increasing sophistication of deterministic models provides important risk management metrics that are valuable to both buyers and sellers of insurance.  We are seeing renewed interest in securing SAFETY Act protection, which lowers or eliminates the liability risks of manufacturers or purchasers of products and services used in combating terrorism.  Growth of Terrorism insurance facilities will foster placement eciencies and drive cost savings. PRICE PREDICTION -5% TO FLAT 2011$3,000.0 0 $3,500.0 0 $2,50 0.00 $2,000.0 0$1,500.00$1,000.00$500.00$0.00 2012201320142015 Property Terr orism PV NC BR TERRORISM CAPACITY ($Million) CONTACT WENDY A. PETERS TERRORISM PRACTICE LEADER 610 254 7288 wendy.peters@willis.com WILLIS MARKETPLACE REALITIES 2015 SPRING UPDATE26 TRADE CREDIT  Trade Credit insurance rates and retention/deductible levels continue to level o after more than two years of soft market conditions, but reductions are often attainable.  Abundant capacity is still available outside of the retail industry, and we expect a buyer’s market for the next 12 months.  Capacity for Latin America is becoming scarce due to downward economic forces.  Claim volume and collection actions remain moderate domestically but are more active in Europe (due to nancial distress) and Asia (due to cultural issues).  Payment plan requests are still frequent.  Despite an impressive record of claim payments associated with the 2007-2008 nancial crisis, purchase of credit insurance in the U.S. lags behind other countries.  Despite ongoing conicts in the Middle East and Ukraine, the overall global economy remains mostly stable. However, the cooling of major emerging markets such as China and Brazil continues to cause concern in the credit markets.  Capacity for Ukraine will not appear as long as the civil conict continues. The growing sanctions regime against Russia contributes to a strong sense of caution with Russian risk.  In other sectors, falling premium rates continue to oer signicant opportunities for small, medium and multinational corporations wishing to transfer the risk of non-payment of receivables. PRICE PREDICTION -10% TO FLAT CONTACT SCOTT ETTIEN TRADE CREDIT AND POLITICAL RISKS WILLIS FINANCIAL SOLUTIONS 212 915 7960 scott.ettien@willis.com Willis North America Inc. Brookeld Place 200 Liberty Street, 7th Floor New York, New York 10281-1003 United States Tel: +1 212 915 8888 www.willis.com 50897/04/15