Commercial P/C Market Softens More in Second Quarter, Council Survey Shows
July 2005
The commercial property/casualty market continued
to soften during the second quarter of 2005, with commercial insurance brokers
reporting that insurers are aggressively competing for new business and fighting
hard to keep their renewals.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
The commercial property/casualty market continued to soften during the second
quarter of 2005, with commercial insurance brokers reporting that insurers are
aggressively competing for new business and fighting hard to keep their renewals.
According to the Commercial Property/Casualty Market Index sponsored by The
Council of Insurance Agents & Brokers, the vast majority of small, medium, and
large accounts saw their premium rates drop during the second quarter.
The Council represents the nation's leading commercial insurance brokers
who annually write 80 percent of the property/casualty premiums in the United
States and administer billions of dollars in employee benefits accounts.
Brokers responding to the survey said 49 percent of the small accounts experienced
premium decreases of 1-10 percent, with an additional 16 percent down 10-20
percent. For medium and large accounts, the decreases were more dramatic, with
41 percent of medium accounts down 1-10 percent, and 44 percent down 10-20 percent,
and 34 percent of large accounts down 1-10 percent, 39 percent down 10-20 percent,
and 12 percent down between 20-30 percent.
An analysis of The Council survey data by Lehman Brothers showed premiums
for the average commercial account declined 9.7 percent during the quarter.
The average small commercial account experienced a 5.6 percent decrease in rates;
the average mid-sized account premium was down 11.4 percent; and the average
large account premium decreased by 12 percent.
The same decrease in premium rates was apparent across most lines of commercial
insurance during the second quarter, although brokers said they still were experiencing
some difficulty with surety bonds as well as director's and officer's insurance,
medical malpractice coverage and habitational risks such as residential construction.
'"Do whatever it takes to keep your renewals' is the message underwriters
are getting from management and passing it onto us," a broker in the Southwest
reported. "On business they have an appetite for, they work very hard to keep—reducing
the rate, eliminating deductibles, easing loss control issues, etc."
"Many accounts that had a hard time finding a home have multiple insurers
wanting them," agreed a broker from the Southeast.
Brokers from all regions of the country reported a heightened appetite for
new business, and several of the responses suggested that less-than-optimal
financial figures from the first quarter could be prompting carriers to go after
market share more aggressively.
"With many experiencing anemic first quarter premium growth, competition
on price has accelerated," said a broker in the Northeast.
Several brokers said regional markets are being particularly aggressive,
especially on middle market business.
The survey also showed a slight increase in the take-up of terrorism insurance
during the second quarter for medium and large accounts although the total number
of customers buying the insurance remains relatively small. The brokers responding
to the survey said the main reasons their customers do not buy terrorism coverage
are the belief they are not likely targets of an attack and the cost of the
coverage.
Commercial Property—Casualty Market Survey
Second Quarter 2005 Released: July 2005
Below are the survey results for: ALL REGIONS
NUMBER OF RESPONSES: 131
1. On average, how have premium rates changed over the last three months
(April 1 - June 30) 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 (April
1 - June 30) 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 Rate Declined 9.7%
Figure
2: Average Commercial Premium Rate Changes by Account Size
Figure
3: Cumulative Quarterly Rate Increases By Account Size Over 5 Years
Figure
4: By-Line 2Q05 Rate Changes Ranged From -13.3% 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 Over 5 Years
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: Commerical 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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