Expert Commentary

RIMS Survey Reports Spike in Property Insurance Rates

The Q4 survey showed that property rates rose sharply in response to insurer losses from the record hurricane damages, ending 2 years of falling premiums. Other increases have yet to be seen and the jury is still out on whether the property rate spikes will catalyze upturns elsewhere and harden the market.


U.S. Insurance Market Update
February 2006

Property insurance rates increased sharply in the fourth quarter of 2005, according to the RIMS Benchmark Survey,™ the industry's only comprehensive survey of current policy renewal prices as reported by corporate risk managers. Reversing a 2-year trend of steadily falling property insurance premiums, some commercial insurance buyers saw property premiums increase by as much as 33 percent, with a median increase of 8 percent, in the fourth quarter. The premium increases were driven by record-shattering insurer losses as a result of the destruction caused by Hurricanes Katrina, Rita, and Wilma, estimated by Advisen to cost the insurance industry nearly $58 billion.

The results validate feedback the RIMS Benchmark Survey received in the third quarter when risk managers reported that property insurance programs were beginning to experience as much as a 20 percent rate increase due to the widespread damage caused by these storms.

While some analysts have predicted that the hurricane losses would also spark higher premiums in other lines of insurance, there was no evidence of that in the fourth quarter numbers for casualty lines. Directors and officers liability renewals were flat, and general liability renewals were down 3 percent.

"The insurance market shrugged off the record hurricane losses of 2004, but the combined impact of Katrina, Rita, and Wilma was clearly more than the market was ready to absorb in 2005," said Karen Beier, member, RIMS Board of Directors, Membership and Chapter Services portfolio. "So far, it seems only property insurance has been affected, but it remains to be seen if the rise in property rates will be the catalyst for an overall upturn in prices and a harder market."

The 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. The RIMS Survey currently includes information from nearly 42,000 corporate insurance programs, the largest amount of data ever contributed to the survey in its history.

"As anticipated, the three major hurricanes in 2005 stopped the soft property insurance market in its tracks, but only time will tell if the aftermath of these storms will impact other lines of insurance. Also, we don't know if property insurance premiums have hit the ceiling or if they will continue to increase in Q1 of this year," said David Bradford, editor-in-chief at Advisen. "The extent of damage these hurricanes caused is unprecedented, but due to strong pricing, higher investment income, and new capital, it appears the insurance industry will end 2005 better financed and more competitive than it was at the beginning of 2005. Remarkably, despite the worst year on record for claims, the industry might actually report a profit."

About the Benchmark Survey

Risk managers who contribute insurance schedule data to the survey can benchmark both the structure of their commercial insurance programs and the cost of insuring their risk against a highly relevant group of similar companies. Additionally, survey respondents can use customized software to view detailed schedules of insurance programs for current and past years and to create full-color charts. Both benchmark charts and program charts download into any presentation for senior management. The results of the RIMS Benchmark Survey are available online, published continuously throughout the year, and in a book, published once each year. Visit www.advisen.com/ for details. Risk management professionals can contribute their data by e-mailing current and prior year policy schedules to


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