Despite concerns about losses arising from the continuing crisis in the subprime
mortgage market, the average directors and officers liability (D&O) premium
fell 11 percent in the fourth quarter, far outstripping decreases in other lines
of business tracked by Advisen for the RIMS Benchmark Survey™. While posting
more modest decreases, the persistent soft market continued to wear away at
pricing in general liability (-3.0 percent) and property (-1.3 percent). After
falling sharply in 2006, due largely to reform measures in several large states,
workers compensation premiums continued the more moderate trend seen throughout
2007. The average workers compensation premium fell 1.4 percent during the quarter.
"Overall, 2007 was a good year for risk managers—certainly as it relates
to the cost of insurance," says John R. Phelps, ARM, CPCU, member of RIMS Board
of Directors and director of business risk solutions for Blue Cross and Blue
Shield of Florida, Inc. "The downward pricing momentum in the fourth quarter,
especially in D&O, suggests that the soft market still hasn’t hit bottom."
"Insurance companies are still posting very good results and probably will
end the year with an underwriting profit," says David Bradford, editor-in-chief
of Advisen. "That should further stimulate competition, and buyers can look
forward to yet lower insurance costs. But the soft market will eventually take
its toll on insurer earnings—maybe starting as early as the second quarter of
2008."