First Quarter 2003 CIAB Market Survey: Markets May Be Stabilizing
April 2003
About two-thirds of small, medium, and large
accounts are still seeing up to 20 percent increases for all lines but, unlike
previously, only few are seeing 20-30 percent increases, according to the Council
of Insurance Agents & Brokers first quarter 2003 survey. There are signs the
marketplace is beginning to stabilize, with business interruption and commercial
property showing the greatest moderation. The Council represents the top tier
of insurance brokers in the country who write 80 percent of the commercial property/casualty
insurance premiums annually.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
Nineteen months after the World Trade Center attacks sent the market into
turmoil, premium increases for commercial property/casualty insurance are moderating,
and there are signs the marketplace is beginning to stabilize, according to
the First Quarter 2003 Market Index survey by The Council of Insurance Agents
& Brokers.
About two-thirds of small, medium, and large accounts are still experiencing
average increases of up to 20 percent for all lines of insurance. But unlike
previous surveys, survey respondents said only a small proportion of their accounts
had rate hikes in the 20 to 30 percent range. Only a small percentage of accounts
saw rates go up more than that, while 12 percent of the small accounts and 8
percent of both medium and large accounts experienced no change at all in their
commercial property/casualty premiums for renewals during the survey period.
Breaking insurance down by line, business interruption and commercial property
showed the greatest moderation, with 16 percent of respondents reporting that
premiums for those lines either were holding steady or dropping slightly. Conversely,
medical malpractice premiums increased the most, with about one-third of the
accounts experiencing rate hikes of from 30-100 percent, and an additional 8
percent rising by more than 100 percent. The following charts present a detailed
summary by account types.
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The only other commercial lines to experience premium increases in the 30-50
percent range were umbrella policies, construction risks, and D&O policies.
The Council represents the top tier of insurance brokers in the country who
write 80 percent of the commercial property/casualty insurance premiums and
administer billions of dollars in benefit accounts annually.
In responses to open-ended questions in the survey, the brokers said they
did not consider the commercial market to be "softening" but instead used terms
such as "stabilizing," "flattening," "relaxing," "loosening," and "steadying"
to describe market conditions.
"Not softening when rates are still climbing 20 percent," said one broker
in the Northeast, "but it appears underwriters are slightly more interested
in quoting commercial business compared to 6 months ago."
"Property rates are flat, a good indication that in another 12 to 15 months
we'll see softening," added a broker from the Southwest.
As the hard market begins to turn the corner, capacity is still tight in
a number of areas, and insurers continue to watch the risks they take on very
carefully. While carriers may be more willing to compete on price, underwriters
are still prevailing in terms of exclusions and the terms and conditions applied
to risks.
Ken A. Crerar, president of The Council, said the survey suggests that in
commercial property and business interruption, which have experienced the greatest
price increases, the market is beginning to stabilize. This is particularly
true in the Northeast, where rates had increased at the fastest clip.
"There are still exceptions in major metropolitan areas, especially when
a trophy property or major tourist attraction is involved, but our members are
reporting that more competitive pricing may be returning to the market," Crerar
said. "Carriers are also more willing to write risks than a year ago,
another sign of market stabilization."
"Things have settled down," said a broker in the Northeast. "Seems like
the standard markets have cleaned up their books and like what's left."
Construction coverage for both commercial and residential properties is still
difficult to obtain, especially in the Pacific Northwest, because of concerns
over class action suits relating to toxic mold and other environmental concerns,
while professional liability coverage is hard to find and highly priced in all
areas of the country, the survey showed.
Only 16 percent of the brokers surveyed said they had noticed an increase
in the purchase of terrorism coverage since the war with Iraq began, and the
respondents indicated that in many cases, only those required to by lenders
are actually buying terrorism insurance.
"Main Street USA risks still don't see the benefit of the additional cost,"
said a broker from the Northeast.
"Classic case of adverse selection," said another. "Those who do not feel
exposed are choosing not to purchase coverage—a potential unfunded
catastrophe should a certified terrorism event occur outside of major
cities."
Looking ahead to major market trends for the coming year, the brokers said
they are watching the economic conditions carefully because of worries about
potential insolvencies of both insurers and reinsurers. And the brokers said
if there is another disaster, natural or manmade, any moderating trends would
be short-lived.
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, D.C.—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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