Commercial Property/Casualty Premium Rates Continue to Soften in First Quarter
2005
April 2005
Commercial property/casualty premiums continued
to soften during the first quarter of 2005, with the average rates for all sizes
of accounts reaching their lowest levels since the commercial insurance market
peaked in the fourth quarter of 2001.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
Commercial property/casualty premiums continued to soften during the first
quarter of 2005, with the average rates for all sizes of accounts reaching their
lowest levels since the commercial insurance market peaked in the fourth quarter
of 2001.
Survey data released today by The Council of Insurance Agents & Brokers showed
almost 80 percent of large accounts were down more than 10 percent during the
first quarter of 2005. Premiums for eight of 10 commercial lines in the survey
for all account sizes were either stable or down as much as 20 percent, according
to the survey.
An analysis of The Council survey data by Lehman Brothers Equity Research
showed that for all sizes of accounts, premiums declined an average of 9.4 percent
in the first quarter. The average rate decline for small accounts was 6 percent,
for medium accounts 10.9 percent, and for large accounts 11.4 percent.
The highest premiums across-the-board occurred in the fourth quarter of 2001,
immediately after the terrorist attacks of Sept. 11, 2001, when the average
premium increase was 28.5 percent, the Lehman analysis showed.
The Council’s Commercial Market Index showed virtually all lines of commercial
p/c insurance experienced a similar downtick, with premiums stable or down by
as much as 20 percent during the quarter that ended on March 31, 2005. A scattering
of commercial lines such as broker errors and omissions, workers compensation,
construction and medical malpractice experienced a slight increase in premiums
of from 1-10 percent. But even those accounts more often had stable or slightly
reduced rates.
The Council represents the nation’s leading commercial insurance brokers
who write more than 80 percent of all commercial property/casualty premiums
and administer billions of dollars in employee benefits accounts annually.
In answers to open-ended questions, the brokers said the decrease in premiums
was particularly noticeable in accounts representing so-called "vanilla" risks
where there is little perceived exposure. And while there still is discipline
in underwriting, carriers are beginning to show more flexibility in deductibles
and terms and conditions as they seek new business.
"Many average and above accounts are being targeted by competition," said
one broker from the Southwest. "Maverick carriers driving premiums down on selected
accounts, searching for market share. Here we go again."
"Carriers are more flexible in their underwriting appetite as their zeal
for new business continues to influence their decisions," said a broker from
the Northeast.
Ken A. Crerar, president of The Council, said it is particularly important
in times of soft market conditions for commercial customers to look to their
professional insurance brokers for insight into the overall stability of carriers
as well as the quality of services they provide.
"When carriers start competing for business based on who can offer the lowest
premiums, issues such as solvency move to the forefront. Insurance is fundamentally
based on a promise to pay, and if that promise cannot be honored, the best price
may not be the best deal," Crerar said.
The analysis of Council survey data to get the average rate increases and
the attached charts based on The Council survey data were prepared by Lehman
Brothers.
Commercial Property—Casualty Market Survey
First Quarter 2005 Released: April 2005
Below are the survey results for: ALL REGIONS
NUMBER OF RESPONSES: 108
1. On average, how have premium rates changed over the last three months
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 for the
following lines? Please check N/A if you don't know or don't handle the line.
Table
2
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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 profitable of all commercial insurance agencies and brokerage firms. 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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