Insurers' Profits Plunge, Risk Managers Reap Benefits from a Competitive
Market
October 2009
Rising premiums are on the horizon, but the
recession continues to delay their arrival, According to RIMS Benchmark Survey™.
by
Advisen Ltd.
Profits are sharply lower, and tens of billions of dollars have been wiped
from their balance sheets, but insurers continue to renew commercial property
and casualty insurance programs at deeply depressed rates, according to the
RIMS Benchmark Survey™, administered by Advisen Ltd. The survey tracks changes
in insurance policy renewal prices as reported by North American corporate risk
managers. Commercial insurance buyers are benefitting from low prices due in
part to the global economic recession, which has suppressed demand for insurance
capacity, prompting underwriters to compete for diminishing premium dollars.
"Insurers have bounced back from the worst first quarter on record, but their
results are still pretty grim," says Dave Bradford, Advisen executive vice president
and editor-in-chief of the survey. "Carriers are posting underwriting losses,
but in this recession, they have found it nearly impossible to push through
rate increases except in a few especially distressed areas."
Property insurance policies renewed in the third quarter with essentially
no change in average premium. Directors and officers (D&O) liability policies
also renewed with no change in average premium, though the D&O market remains
divided between the financial institution segment, which was pummeled by the
subprime mortgage market meltdown and has seen premiums rise, and the rest of
the market, which still is seeing premiums drift lower. The average general
liability premium fell 3.7 percent, and the average workers compensation premium
was down 4.5 percent. Contributing to lower general liability and workers compensation
average premiums were declining sales and payrolls, which are used to calculate
premiums.
"It's still a buyer's market, and it looks as if it may stay that way for
a while," says Daniel H. Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board
of directors and assistant treasurer, risk management, at Snap-on, Inc. "Under
normal circumstances, premiums should be rising by now. But many companies are
buying less insurance, and underwriters feel pressured to keep prices low to
hold on to the remaining premium dollars."
About the RIMS Benchmark Survey™
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
at
www.RIMS.org/brokerform or by calling 800–655–6590. Risk management professionals
can also contribute by e-mailing current and prior year policy schedules to
Benchmark@RIMS.org or by faxing to 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. Visit
www.RIMS.org/benchmark for details.
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