Commercial Property/Casualty Market Continues To Ease
April 2004
The Council of Insurance Agents & Brokers
has released its first quarter data showing that the average premium increases
for all sizes of accounts are returning to the levels they were at the end of
1999.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
The commercial property/casualty market continued to ease across most lines
during the first quarter of 2004, with the average premium increases for all
sizes of accounts returning to the levels they were at the end of 1999, when
the last soft market cycle was coming to an end.
The latest quarterly market index by The Council of Insurance Agents & Brokers
reflects responses from the nation's largest commercial insurance brokers who
write 80 percent of the annual commercial p/c premiums and administer billions
of dollars in employee benefits accounts. An analysis of those premium trends
by Lehman Brothers Equity Research provided average rate hikes for the various
sizes of accounts as well as historical comparisons.
The survey showed that about 50 percent of small accounts, those generating
less than $25,000 in commissions and fees, experienced no change in premiums
or saw premiums drop during the quarter by 1–10 percent. An additional 41 percent
of the small accounts had only slight premium increases in the 1–10 percent
range. The Lehman analysis of Council data showed the average premium increase
for small accounts was about 3 percent.
For medium accounts, ranging from $25,000 to $100,000 in commissions and
fees, the picture was roughly the same. Forty-one percent of the accounts had
no change or a drop of as much as 10 percent in premiums, while 9 percent of
respondents reported a drop of 10-20 percent. Forty-two percent of the medium
accounts had premium increases in the 1-10 percent range. The average rate of
increase for medium accounts was 1 percent.
Large accounts had experienced the sharpest increases in premiums during
the hard market conditions of the last two years, and they also experienced
the greatest drop in premiums. The survey showed 45 percent of the large accounts
holding steady or having premiums drop by 1–10 percent, while 12 percent dropped
from 10–20 percent, and 4 percent dropped by 20–30 percent. On average, premiums
for large accounts decreased by 3 percent.
"The survey still shows some trouble spots in the commercial market, where
commercial coverage is hard to find and expensive when you can find it," said
Ken A. Crerar, president of The Council. "The biggest trouble areas remain residential
construction risks, umbrella coverage, workers' compensation and medical malpractice."
"Pretty soon residential contractors will be joining the doctors to either
protest their premiums or retire from the business," observed one broker from
the Northeast.
With softening market conditions returning to most lines, brokers expressed
concern that it is only a matter of time before insurers push aside the stricter
underwriting standards of the last few years and start going after new business
by premium-cutting. And if that happens, several said, the financial stability
of carriers moves back to the top of a list of concerns.
Return of insurer price competition was listed as the top concern of 40 percent
of the brokers responding to the survey, and it was the second biggest concern
of 41 percent more.
"Pricing has begun to go down on certain lines and types of accounts. We
fear the insurers may get back into 'stupid' season," said a broker from the
Southwest.
"Softening pricing is a recipe for another awful cycle of insolvencies,"
said a broker from the Pacific Northwest.
The survey also suggested there may be another looming environmental concern
that is beginning to be excluded from renewal policies—silica. Silica, an element
that can be found in quartz and sand, is the basic material used for most common
communication-grade optical fibers. In crystalline form, it can cause a disabling
and sometimes fatal lung disease.
Brokers from the Midwest and the Southeast mentioned in their responses to
open-ended questions that carriers were excluding silica exposure. It was the
first time silica has appeared in market index responses.
Commercial Property—Casualty Market Survey
First Quarter 2004 Released: April 2004
Total Responses: 113 (Represents independent
insurance agents + brokers across the United States). Below are the survey results
for: All Regions of the United States.
1. On average, how have premium rates changed over
the last 3 months (January 1–March 31) for the
following accounts? Please check N/A if you don't know or don't handle
the type of account.
Table 1
2. How much have premium rates changed over the last
3 months (since January 1–March 31) for the following
lines? Please check N/A if you don't know or don't handle the line.
Table 2
Average Commercial Premium
Rate Changes
Insurance Rate Changes
Average Premium Rate Changes
Insurance Rate Changes #2
Rate Charts
The Council of Insurance Agents &
Brokers is the voice of the market leaders and the premier association
for commercial insurance and employee benefits intermediaries in the United
States and abroad. From its headquarters in Washington, DC—with programs conducted
throughout the nation and world—The Council represents the largest, most productive,
and most profitable of all commercial insurance agencies and brokerage firms.
Only the top one percent of all agents and brokers qualify. The Council's members
in more than 3,000 locations, place 80 percent—well over $90 billion—of all
U.S. insurance products and services protecting business, industry, government
and the public at-large, and they administer billions of dollars in employee
benefits. Since 1913, The Council of Insurance Agents & Brokers has worked in
the best interests of its members, securing innovative solutions and creating
new market opportunities at home and abroad. Web site: www.ciab.com.
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