Year Closes with No End in Sight to Soft Commercial Insurance Market
January 2010
Rising premiums are on the horizon, but the
recession continues to delay their arrival, According to RIMS Benchmark Survey™.
by
Advisen Ltd.
Commercial insurance buyers saw premiums continue to tumble in the fourth
quarter, with few signs that that the soft phase of the pricing cycle is near
its end, 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. Directors and officers liability (D&O),
general liability, and workers compensation all posted decreases in average
premium, while property once again held steady.
"Pricing trends have been remarkably consistent over the past several quarters,"
said Dave Bradford, executive vice president of Advisen and editor-in-chief
of the survey. "The combination of a weak economy, which has suppressed demand
for insurance capacity, combined with a very mild year for natural catastrophes,
has kept downward pressure on rate levels. Unless very large catastrophe losses
soak up excess capacity, we expect to see this trend continue well into 2010."
Workers compensation and general liability saw the largest decreases, with
average declines in renewal premiums of 5.5 percent and 5.0 percent respectively.
Average D&O premium fell 2.8 percent, and property was essentially unchanged,
falling less than half of a percentage point.
"Some risk managers are reporting higher renewal premiums but, overall, the
market continues to be very favorable for insurance buyers," said Daniel H.
Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board of directors and assistant
treasurer, risk management, at Snap-on, Inc. "Capacity is abundant in almost
every line of insurance. As things now stand, there is little reason to expect
commercial insurance prices to increase in the near future. More likely, they
will fall yet further."
While market conditions are benefiting insurance buyers, they are contributing
to growing financial stress on agents and brokers that derive much of their
income from commissions on insurance premiums. Not only is commission income
down because of falling rates, the global recession has cut into insurance premium
volume as companies downsize or go out of business. Insurance companies also
are suffering from lower premium volume, but the impact is lessened by income
from invested assets and by favorable claims experience due to the fact that
no major natural catastrophes occurred in the United States in 2009. The U.S.
property and casualty insurance industry posted a 4.5 percent return on average
surplus for the first 9 months, rebounding from a negative rate of return in
the first quarter, according to the Insurance Information Institute.
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
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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