(Reuters) - North American commercial property insurance rates could rise by as much as 25 percent during 2018 for properties that suffered catastrophe losses this year, according to a report on Monday by insurance brokerage Willis Towers Watson (WTW.N).
The commercial property insurance market, which has been soft during recent years, is now heading toward a correction, largely due to hurricanes Harvey, Irma and Maria, which together triggered one of the most destructive hurricane seasons in history, Willis Towers Watson said.
Rates for commercial properties that were not damaged, but located in catastrophe-prone areas, may increase between 10 and 20 percent, while the cost of coverage for properties in other locations could increase by up to 5 percent, Willis Towers Watson said.
Insurers around the globe are looking to raise rates after what is likely to have been their most costly quarter on record. American International Group Inc (AIG.N) said on Friday it would pursue double-digit rate increases and bolster reinsurance, following $3 billion in third-quarter catastrophe losses.
Hurricanes Irma and Maria alone caused as much as $135 billion in insured losses, according to modeling firm AIR Worldwide. Earthquakes in Mexico could cost billions more.
“The marketplace is going to react, and buyers need to be ready,” Willis Towers Watson wrote in the report. Insurers will have a clearer sense of their losses when policy renewals begin next year, the company said.
Auto liability rates may increase between 3 and 8 percent as insurers continue to ratchet up rates because of higher accident rates due to distracted driving and rising costs to fix damaged vehicles, Willis Towers Watson said.
Most buyers of cyber insurance, which covers certain damages if a company is hacked, will face modest increases when they renew, triggered by growth in the sector. “The cleanest risks may still see low single-digit decreases,” the report said.
Reporting by Suzanne Barlyn in New York; Editing by Matthew Lewis