First Quarter RIMS Benchmark Survey™ Shows Soft Landing
May 2009
Amid an unprecedented economic crisis, insurance
premiums for businesses continued to slide toward a "soft landing" rather than
an abrupt reversal resulting in rate increases. While banks and other financial
institutions bought directors and officers (D&O) insurance at substantially
higher rates, the rest of the commercial insurance market in the first 3 months
of 2009 saw a continuing trend of little or no change in rates.
by
Advisen Ltd.
Data from RIMS Benchmark Survey™, the industry's leading survey of policy
renewal prices as reported by North American corporate risk managers, corroborates
Advisen's recent forecast that a dramatic shift to higher rates is unlikely
and that due to the impact of the recession, commercial insurance buyers will
see a more gradual hardening of the market.
General liability premiums fell 3.8 percent for policies renewing during
the first quarter of 2009, as compared to a 5.9 percent decline in the fourth
quarter of 2008. The average workers compensation premium fell 2.5 percent which
is similar to price decreases over the past several quarters.
The average property renewal was flat for the first quarter as compared to
a decline of 3.8 percent in the fourth quarter of 2008. However, there was a
wide range of changes in recent renewal premiums for individual property risks:
premium changes ranged from a decrease of 11 percent to an increase of 14 percent.
The D&O market continued to be split between financial institution (FI) risks
and all other (commercial) risks. Overall, the average D&O premium increased
by 3.0 percent, but the increase was driven entirely by financial companies.
Excluding FI firms, the average renewal was down 3.0 percent. Higher FI premiums
are the outcome of massive losses from the meltdown of the sub-prime mortgage
market and the ensuing credit crisis. By comparison, overall D&O rates fell
1.2 percent in the fourth quarter of 2008 and fell 4.5 percent during that period
excluding FI firms.
"Most risk managers continue to see flat or slightly lower premiums at renewal,"
says Daniel H. Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board of directors
and assistant treasurer, risk management at Snap-on, Inc., from the RIMS Annual
Conference in Orlando. "The insurance market is still very competitive and,
while some insurers are predicting an imminent hard market, there are few signs
that rates will rise sharply anytime in the near future."
"Even though the credit crisis and the global recession have had a negative
impact on insurers' top and bottom lines, so far financial institution D&O is
the only segment tracked by RIMS Benchmark Survey™ to respond with higher premiums,"
says Dave Bradford, Advisen's executive vice president and editor-in-chief of
RIMS Benchmark Survey™. "Insurers struggle against falling rates, increased
losses in some lines, and sharply lower investment income due to the credit
crisis, but the commercial insurance industry is still overcapitalized. We expect
to see a favorable pricing environment for risk managers through 2009."
About The RIMS Benchmark SurveyTM
RIMS Benchmark Survey™ is produced by Advisen, Ltd., which collects and analyzes
the data and provides the technology infrastructure for the survey's online
services. Risk managers and buyers of insurance either contribute directly to
RIMS Benchmark Survey™ or by using our "data participation letter" to authorize
their broker to provide the client's program details. The letter is available
online or by calling (800) 655-6590.
Risk management professionals can also contribute by e-mailing current and
prior year policy schedules to or by faxing (212) 655-7453.
Risk managers who contribute data to the survey can benchmark the structure
of their commercial insurance programs, retained loss costs, exposure demographics
and Total Cost of Risk (TCOR) against a highly-relevant group of peer 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 full-color program tower charts. Both benchmark charts and
program charts can be downloaded into any presentation for senior management.
The results of the RIMS Benchmark Survey™ are available
online or in an annually published book.
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