Low Consumer Demand and Increased Insurer Appetite Drive Soft Market in
Fourth Quarter
February 2010
Commercial property/casualty premium rates
continued to fall in the fourth quarter 2009 at about the same 6 percent rate
as in the third quarter, according to The Council of Insurance Agents & Brokers'
quarterly Commercial P/C Market Index Survey.
by
The Council of Insurance
Agents & Brokers
Washington, D.C.
Low demand continued to put pressure on rates as carriers competed for new
business.
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Average
Rate Declined 6% in 4Q09.
"Tough competition for new business was the name of the game last quarter
as carriers chased market share in a still weak economy. Added pressure came
from clients putting the squeeze on carriers to get the best terms and rates,"
said Council President Ken A. Crerar. "We don't expect to see pricing turn upward
until demand picks up and capacity diminishes."
Overall, the rates for small, medium and large business accounts declined
slightly less than rates in the third quarter, according to charts prepared
by Barclays Capital Equity Research using The Council's survey data.
Brokers across the country reported very aggressive underwriting by carriers.
"Risk selection as well as pricing has deteriorated," reported a broker from
the Southeast.
A Northeast broker said insurers are "more flexible on terms and conditions—underwriting
appetite expanding."
Another said, "Terms and pricing are still excellent—competitive marketplace
is driving the rate down."
Brokers in the Midwest saw much of the same. "Carriers more amendable to
providing terms and conditions they were reluctant to provide previously to
try to maintain rate levels."
Carriers were competitive on risks in the Pacific Northwest as well. One
broker said carriers were using "competitive pricing with available capacity."
Commercial brokers also reported that carriers' appetite for new business
is strong in the face of weak demand.
"Carriers continue to push for flat renewals but will aggressively push for
new business."
One broker said carriers are "expanding risk and industry appetites to look
at more business."
Another said, "New business is very aggressive. Underwriters are trying to
hold the rate on renewals."
The push for business is cutting into the surplus lines business, a broker
noted. "Carriers had a tremendous appetite for premium. Standard markets are
snapping up surplus lines type accounts and providing broader terms at cheaper
rates."
Even lines that were tougher to place in the first half of the year are getting
more competitive, according to the respondents:
"After flattening for much of the second half of 2009, we saw an uptick in
competitive pricing during the last quarter, particularly in the casualty lines."
"Catastrophe property rates have dropped and terms loosened, significantly."
"WC [is] still a competitive marketplace. Unfortunately, exposure is down
and so are rates, which results in premiums that are a fraction of previous
years."
The survey respondents reported no problem with capacity, which appears to
remain at ample levels.
"Too much capacity chasing too little business. There are a number of new
entrants into the market who seem to be focusing on market share over underwriting
and pricing discipline."
"No lack of capacity other than occasional poor loss, catastrophic exposures."
"No significant capacity changes over the past three months."
And lastly, an overwhelming 74 percent of the brokers responding to the survey
said that demand for insurance products did not improve in the fourth quarter.
Founded in 1913, The Council is the premier association for
commercial insurance and employee benefits intermediaries. The Council represents
the leading commercial brokers and agents in the United States and abroad. Council
members annually place 80 percent of all commercial property/casualty premiums
in the United States and administer billions of dollars in employee benefits
accounts. www.ciab.com.
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