First Quarter Market Survey: Commercial PC Renewal Rates Flat
May 2006
Commercial property/casualty rates were flat
or fell slightly during the first quarter of 2006, with renewal premiums for
half of all account sizes holding steady or dropping between 1 and 10 percent
in the first 3 months of the year.
by The Council of Insurance
Agents & Brokers
Washington, D.C.
In the latest commercial P/C market survey by The Council of Insurance Agents
& Brokers, 15 percent of the brokers responding said small accounts received
premium quotes at renewal that were between 10 and 20 percent lower than similar
quotes received during fourth quarter 2005. And 22 percent and 24 percent of
the brokers, respectively, said medium and large accounts were down between
10 and 20 percent from the previous quarter.
The Council represents the leading commercial insurance agents and brokers
in the United States and around the world. Council members write more than 80
percent of the commercial property/casualty premiums in the United States and
administer billions of dollars in employee benefit accounts.
The Council's Commercial Property/Casualty Market Index Survey is the longest
running market survey in the industry, dating back to the fourth quarter 1999.
According to an analysis of The Council data by Lehman Brothers Equity Research,
the average commercial P/C account renewing in the first quarter of 2006 experienced
a rate decline of 2.7 percent.
The Lehman analysis and broker responses to open-ended questions in The Council
survey suggested that the rate of decline in premium prices is slowing and in
some cases, premiums may be stabilizing. The exception is in the coastal regions
of the country where both commercial property capacity and wind coverage are
problematic.
"Suddenly, after January 1, carriers wanted a flat (rate) or rate increase
on renewal. This was in contrast to the rate reductions we saw prior to year-end.
It came with no warning," said a surveyed broker from the Southwest.
The pattern of stable to slightly reduced premiums on renewal accounts was
evident across virtually all commercial P/C lines. The commercial P/C accounts
most likely to experience premium rate increases at renewal, albeit relatively
modest increases of between 1 and 10 percent, were commercial property, commercial
auto, business interruption, medical malpractice, terrorism, and broker errors
and omissions accounts.
"Overall rates are down except for property
cat exposures (which are) up more than 25 percent," said a broker from the Midwest.
In responding to open-ended questions, brokers said as the next hurricane
season rapidly approaches, Florida property capacity is limited, and coastal
wind capacity is quickly diminishing.
"In personal lines, we are just about nonexistent except for the state-run
Citizens Insurance Co. The majority of the market has pulled out or is on standby
getting decisions from management or reinsureds as to proposed action," said
one broker. "In regard to commercial, we are seeing increased property rates
as a result of the continued multiple storms that occurred in Florida in 2004
and 2005."
"Limited wind capacity," said another respondent from the Southeast. "It
takes 10 carriers now to do what two did last year on layered programs."
Commercial Property—Casualty Market Survey
First Quarter 2006 Released: April 2006
Below are the survey results for: ALL REGIONS
NUMBER OF RESPONSES: 105
1. On average, how have premium rates changed over the last three months
(January 1 - March 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 (January
1 - March 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
Average
1Q06 Commercial Rates Decreased 2.7%
Average
Commercial Premium Rate Changes by Account Size
Cumulative
Quarterly Rate Increases by Account Size
By-Line
1Q06 Rate Changes Ranged From -7.9% to +2.3%
Rate
Changes in Other Lines
Average
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 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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