Expert Commentary

Commercial Insurance Premiums Still under Pressure

Excess capacity in the commercial lines insurance marketplace continued to keep premiums under pressure during the second quarter of 2010, according to the RIMS Benchmark Survey,™ administered by Advisen Ltd. Risk managers reported decreases in average renewal premium of between 2.5 and 3.8 percent for property, general liability, directors and officers liability (D&O), and workers compensation insurance.

U.S. Insurance Market Update
July 2010

"The soft market is still going strong," says David K. Bradford, Advisen executive vice president and editor-in-chief of the Survey.

"Insurance capacity remains abundant in almost every line and, as a result of the recession, demand for that capacity has fallen. Unless something happens to wipe out the excess capacity, premiums should continue to drop this year."

Workers compensation saw the largest decrease in average renewal premium during the quarter, falling 3.8 percent. The average property premium was 3.5 percent lower, while general liability dropped 2.5 percent. The average D&O premium, which had been buoyed by rate increases in the financial institution sector in 2008 and 2009, fell throughout the first half of 2010, sliding 3.5 percent in the second quarter.

Although prices continue to fall, predictions for a very active hurricane season may portend higher premiums.

"Risk managers continue to benefit from lower premiums, but a big storm could cause the market to turn at any time," says Robert Cartwright, loss prevention manager for Bridgestone Americas Holding, Inc. and a member of the RIMS Board of Directors.

"Forecasts for the 2010 hurricane season are ominous, and a Gulf Coast hurricane could be especially disastrous because of the oil spill. If catastrophe losses soak up enough capacity, prices could increase for all lines, not just property insurance."

Scientists at Colorado State University's Department of Atmospheric Science forecast 18 named storms in 2010, of which 10 will be hurricanes, and 5 of which will be major hurricanes (Category 3, 4, or 5). They predict the probability of a U.S. major hurricane landfall and Caribbean major hurricane activity to be well above the long-period average. A storm in the Gulf of Mexico could be particularly damaging because of the millions of gallons of oil in the Gulf from the Deepwater Horizon disaster.

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 or by calling 800–655–6590. Risk management professionals can also contribute by e-mailing current and prior year policy schedules to

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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