Despite Hurricane Losses, Overall Soft Insurance Market Continues
May 2006
Although property and general liability insurance
rates increased in the first quarter of 2006, all indications point to a continuing
soft commercial insurance market according to the RIMS Benchmark Survey™, the
industry's only comprehensive survey of current policy renewal prices as reported
by corporate risk managers.
by Advisen Ltd.
In keeping with the soft market conditions evidenced in the last six quarters,
directors and officers (D&O) premiums dropped 3.5 percent in the first quarter
of 2006 and workers compensation rates declined just over 3 percent.
The property and casualty insurance industry overall turned a profit in 2005,
according to survey officials, despite ever-dropping prices and a projected
$58 billion in hurricane losses, suggesting that competition among carriers
would provide for a continuing soft market.
The enduring effect of last fall's hurricane season was still evident in
property premium renewals as 70 percent of survey respondents reported higher
premiums. Average rates rose by nearly 7 percent in the first quarter of this
year, though Advisen analysts suggested the market buoyancy was due more to
underwriter support than to underlying market conditions. Property premiums
increased in the fourth quarter of 2005 after having steadily declined since
the third quarter of 2003.
“The property pricing increases were a knee-jerk reaction by underwriters
to the hurricane catastrophe losses, but probably will not be sustainable,"
said David Bradford, editor-in-chief at Advisen. “The insurance industry posted
a profit for 2005 despite record catastrophe losses and experienced strong growth
in policyholders' surplus, indicating that rate levels are still stalwart and
capacity is abundant in most lines. Conditions are ripe for further softening."
“The insurance market understandably appears a little unsettled by the massive
hurricane losses of 2005," notes Karen Beier, member, RIMS Board of Directors,
Membership and Chapter Services portfolio. “However, risk managers may experience
further softening in the casualty market. Barring more major catastrophes, premiums
should fall further this year."
General liability rates experienced an upward swing of 5.1 percent; previous
quarter survey data showed steadily falling premiums since the fourth quarter
of 2003. Advisen analysts believe that general liability premiums may have been
temporarily pulled higher by the spike in property premium levels, but will
return to the pervasive softening trend by next quarter.
The RIMS Benchmark Survey is produced by Advisen, Ltd., which collects and
analyzes the data and provides the technology infrastructure for the survey's
print and online services. Corporate risk manager participation in the RIMS
Benchmark Survey has never been higher.
About the Benchmark Survey
Risk managers who contribute insurance schedule data to the survey can benchmark
both the structure of their commercial insurance programs and the cost of insuring
their risk against a highly-relevant group of similar companies. Additionally,
survey respondents can use software personalized and configured for their needs
to view detailed schedules of insurance programs for current and past years
and to create full-color charts. Both benchmark charts and program charts download
into any presentation for senior management.
The results of the RIMS Benchmark Survey are available online, published
continuously throughout the year, and in a book, published once each year. Visit www.advisen.com/ for details. Risk management professionals can contribute their data by e-mailing
current and prior year policy schedules to Benchmark@RIMS.org. Corporate risk manager
participation in the RIMS Benchmark Survey has never been higher. Data can also
be sent by fax to Advisen at +1-212-655-7453. Advisen will input the data, making
it available for online review and comparison within days. Participant support
is available by calling +1-800-655-6590.
About RIMS
The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit
organization dedicated to advancing the practice of risk management, a professional
discipline that protects physical, financial and human resources. Founded in
1950, RIMS represents nearly 3,900 industrial, service, nonprofit, charitable,
and governmental entities. The Society serves 9,600 risk management professionals
around the world.
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