Third Quarter Commercial P/C Premiums Continue To Drop
October 2004
Commercial property/casualty insurance premiums
continued to decline significantly during the third quarter of this year, with
two-thirds of all large and medium accounts experiencing drops of up to 20 percent
and an additional 11 percent of large accounts seeing premiums down between
20-30 percent.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
According to the third quarter Commercial Market Index Survey released today
by The Council of Insurance Agents & Brokers, small accounts also saw premiums
decrease in the last quarter but not to the extent of medium and large accounts.
The survey showed premiums for 25 percent of small accounts remained unchanged,
while 34 percent dropped 1-10 percent, and 11 percent declined 10-20 percent
from the previous quarter.
The survey, which traced premium trends from July through September, showed
that the average premium for commercial accounts declined 5.9 percent in the
third quarter. Large accounts dropped by an average of 8.3 percent in the third
quarter; the average medium account premium was down 6.4 percent; and the average
small account was paying premiums 3.1 percent less than during the previous
quarter.
"Price competition has definitely returned to the marketplace, although more
so for new business than renewal business," said Ken A. Crerar, president of
The Council. "But terms and conditions are still tight. Underwriters appear
to be more willing to negotiate on price than on coverage."
The Council represents the top tier of commercial insurance brokers in the
country who annually write 80 percent of the commercial property/casualty premiums
and administer billions of dollars of employee benefits accounts.
Brokers responding to the survey said the premium prices are stabilizing
or dropping for most commercial lines, with property premiums leading the way.
The survey said 39 percent of the commercial property accounts saw premiums
drop by 1-10 percent, while an additional 34 percent of accounts were down 10-20
percent. General liability, umbrella, business interruption insurance and directors
and officers premiums were also among the lines that also showed larger drops
in premium rates.
But some isolated trouble spots remain in the market, the survey showed,
chief among them construction risks, workers' compensation and medical malpractice.
Asked what their top market concern was, the brokers overwhelmingly listed
the return of price competition and its potential implications on insurer solvency.
Tort reform was a distant second followed by an act of terrorism in the United
States and natural catastrophes.
The brokers also were asked about the impact of the four hurricanes that
have struck Florida so far this season.
"Relative to Florida and our recent storm events, carriers are now considering
large windstorm deductibles on larger property accounts in the middle of the
state," one broker reported.
Before the storms, another agreed, the large wind and hail deductibles were
assessed only on locations within 10 miles of the coast, but many inland properties
now are finding their deductibles increasing.
Although the storms have yet to significantly impact rates, the commercial
brokers said they expect the property market in catastrophe-exposed areas to
stabilize, and the ultimate impact may be to slow the rate of property premium
decreases in Florida.
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
Third Quarter 2004 Released: October 2004
Below are the survey results for: All Regions
Number of Responses: 113
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
Average Third Quarter Commercial Rates Decreased 5.9%
Average
Commercial Rate Changes by Account Size
Cumulative Quarterly Rate Increases by Account Size
By-Line
Third Quarter Rate Changes
Rate Changes in Other Lines
Average Third Quarter Commercial Rate Increases by Line
Cumulative Quarterly Rate Increases by Line
Insurance Rate Changes, Small Commercial Accounts
Insurance Rate Changes, Medium Commercial Accounts
Insurance Rate Changes, Large Commercial Accounts
Commercial Auto Insurance Rate Changes
Workers' Compensation Insurance Rate Changes
Commercial Property Insurance Rate Changes
Commercial General Liability Insurance Rate Changes
Umbrella Insurance Rate Changes
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 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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