The Council's Fourth Quarter Market Survey Shows Wind, Flood Coverage Problems
for Coastal Property
February 2006
Coastal property is experiencing a sharp increase
in prices for wind and flood coverage, according to the latest Commercial Insurance
Market Index Survey by The Council of Insurance Agents & Brokers.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
Although the overall commercial property-casualty marketplace has seen little
impact from the severe 2005 hurricane season, coastal property is experiencing
a sharp increase in prices for wind and flood coverage, according to the latest
Commercial Insurance Market Index Survey by The Council of Insurance Agents
& Brokers.
"Two markets exist—coastal property (and that definition has expanded north)
and the rest," observed a broker from the Southeast.
The Council's fourth quarter 2005 survey of insurance brokers showed the
overall commercial p/c marketplace has not registered the price increases some
analysts forecasted after a devastating hurricane season with a record-number
of named storms and extensive damage to Gulf Coast states and Florida.
Sixty-five percent of the small accounts and 60 percent of medium accounts
up for renewal during the quarter experienced premiums that either held steady
or dropped up to 10 percent; 52 percent of the large accounts saw premium rates
hold steady or drop up to 10 percent, and an additional 17 percent of large
accounts experienced premium drops of from 10 to 20 percent.
An analysis of The Council's survey data by Lehman Brothers showed the average
premium rates for renewals dropped 4.6 percent for all sizes of commercial accounts
in the fourth quarter.
The Council represents the nation's leading domestic and international commercial
insurance brokers who annually write 80 percent of the nation's commercial property/casualty
premiums and administer billions of dollars of employee benefits accounts.
Asked whether they had seen pricing changes due to Hurricanes Katrina and
Rita, 58 percent of the survey respondents said "no," while 42 percent said
"yes."
"Some lip service to market tightening, but little if any evidence of it,"
said a Midwestern broker. "Overall, the market continues to be competitive."
But for those in coastal areas subject to flooding and wind storms, it was
a different story, with capacity dropping, wind deductibles and exclusions rising
sharply, and insurance underwriters looking carefully at the risks. One of the
areas being examined is the year commercial structures were built because of
wind code compliance issues, with older buildings receiving higher premium quotes
than newer construction.
"Over 75 percent of the accounts in the Southeast have seen rate increases.
Anything with wind exposure is seeing significant rate increases," a broker
from the Northeast reported.
The survey showed that even with higher deductibles for wind coverage, premiums
were still increasing.
"Huge reductions in wind limits," one broker said. "Fifty to 100 percent
increases in property rates for coastal accounts. Other property accounts flat
or 10 percent increases."
Some brokers said they were waiting to see what impact reinsurance treaty
renewals will have on the property market. According to press accounts, many
of the treaties are being completed later than usual.
Commercial Property—Casualty Market Survey
Fourth Quarter 2005 Released: January 2006
Below are the survey results for: ALL REGIONS
NUMBER OF RESPONSES: 114
1. On average, how have premium rates changed over the last three months
(October 1—December 31) for the following accounts? Please check N/A if you
don't know or don't handle the type of account.
Table
1: Premium Rate Change by Account Size
2. How much have premium rates changed over the last three months (October
1—December 31) for the following lines? Please check N/A if you don't know or
don't handle the line.
Table
2: Premium Rate Change by Coverage Line
Figure
1: Average 4Q05 Commercial Rates Decreased 4.6%
Figure
2: Average Commercial Premium Rate Changes by Account Size
Figure
3: Cumulative Quarterly Rate Increases by Account Size
Figure
4: By-Line 4Q05 Rate Changes Ranged From -9.2% to -6.0%
Figure
5: Rate Changes in Other Lines
Figure
6: Average Commercial Rate Increases by Line
Figure
7: Cumulative Quarterly Rate Increases by Line
Figure
8: Insurance Rate Changes, Small Commercial Accounts*
Figure
9: Insurance Rate Changes, Medium Commercial Accounts*
Figure
10: Insurance Rate Changes, Large Commercial Accounts*
Figure
11: Commercial Auto Insurance Rate Changes
Figure
12: Workers' Compensation Insurance Rate Changes
Figure
13: Commercial Property Insurance Rate Changes
Figure
14: Commercial General Liability Insurance Rate Changes
Figure
15: Umbrella Insurance Rate Changes
Figure
16: Business Interruption Insurance Rate Changes
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 leading commercial insurance
agencies and brokerage firms. Only the top one percent of all agents and brokers
meet membership qualifications. 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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