Cheap Insurance? Don't Count On It RMs Say

By Sam Friedman

NU Online News Service, June 8, Southampton, Bermuda,4:09 p.m. EDT?Although the commercial insurance marketcontinues to soften, not all buyers can automatically count onrapidly falling rates and expanding coverage, brokers and riskmanagers here warned.[@@]

Characterizing the market as "multi-dimensional," Mario Vitale,chief executive officer of New York-based Willis North America,said there are "still some red zones" where pricing, terms andconditions are holding firm.

For example, he said during a panel discussion here at the WorldInsurance Forum, while property insurance premiums are in arelatively steep decline for most buyers, "there are hardersectors, such as those facing quake or flood exposures in keyareas."

Mr. Vitale also noted that environmental, fiduciary and productliability premiums are, for the most part, "still firm," while inthe directors and officers liability market, rates are more likelyto decline in the excess layers, rather than for primarycoverage.

Peter Garvey, president and CEO of North American operations forNew York-based Marsh Inc., agreed there are "micro-classes of riskfor which underwriter selectivity remains demanding."

Lance Ewing, vice president of risk management at CaesarsEntertainment in Las Vegas, who moderated the panel discussion,said he did not feel very confident about premiums continuing theirdecline should a major loss occur?particularly in the propertymarket.

"One severe hurricane or earthquake could shift this market in ahurry," cautioned the immediate past president of the Risk andInsurance Management Society. "This is still a very fragilemarket."

However, Mr. Vitale said he thinks that at this point, it "wouldtake more than one simple catastrophe to dramatically turn themarket hard again."

John Matthews, corporate director of risk management at Harrah'sEntertainment in Las Vegas, said that while in general he is seeing"a lot of softening in terms of reduced rates and increasingcapacity," if a buyer has a poor claims history or recentlysuffered a severe event, "you will still be hard put to get acheaper price" for coverage.

Ellen Vinck, vice president of risk management at United StatesMarine Repair, a ship-maintenance firm based in Norfolk, Va., saidthat establishing long-term relationships with her broker andunderwriters, combined with her company's commitment to sound losscontrol, made a big difference in keeping premium increases undercontrol. Even during the worst of the hard market over the past twoyears, she noted, her rate hikes did not exceed a modest 6percent.