U.S. businesses maintained their level of liability insurance protection during 2007 as costs for the coverage dropped an average of 7.3 percent for firms reporting multiple years of data, according to a new Marsh brokerage survey.

These are some of the results contained in a new global study of 7,265 companies in 58 countries by the New York-based firm. The survey covers corporate insurance buying decisions made during the 12-month period ending March 31, 2007.

For the third consecutive year, the average price for $1 million of liability coverage among U.S. firms declined, falling 4.6 percent to $11,348 in 2007, compared to $11,895 in 2006. After three years of price decreases, costs in 2007 have fallen to 2003 levels, providing some degree of relief from the steady price increases experienced in several preceding years, Marsh said.

The largest U.S. firms in the study (those with revenues exceeding $10 billion) purchased limits of $288 million on average, the greatest amount of coverage of all firms in the study. Notably, firms in this category that reported multiple years of data increased their limits by 2.4 percent.

Midsize firms (those with revenues ranging from $201 million to $1 billion) purchased limits of $51 million on average, increasing their limits by 3 percent.

The smallest firms in the study (those with annual revenues of $200 million or less) increased their average limits slightly to $28 million in 2007 from $27 million in 2006.

"Even though firms of all sizes maintained their levels of insurance protection this year, they need to recognize that they are buying insurance today to cover losses they might have to pay five years from now or more," said George G. Pallis, a managing director of Marsh's National Casualty Practice.

He noted that it can take a lawsuit five years or longer to work its way through the court system.

The study found firms that experienced losses of $5 million or more in the past five years are far more likely to purchase significantly higher limits of coverage.

U.S. firms that have sustained large losses in the past five years purchased limits of $203 million on average, three-and-a-half times the level of protection bought by firms without such losses, said the broker.

The study examined trends based on insurance purchases of businesses in several parts of the world, the bulk of which were in the United States and Europe.

On average, firms based in the U.S. purchased limits of $66 million, while Canadian firms purchased average limits of $42 million. European firms purchased average limits of $37 million, and Latin American firms limits of $10 million.

Companies headquartered in Europe and elsewhere with North American operations purchased higher limits, on average, than those without such operations. For example, among European firms, those with significant North American operations purchased average limits nearly double those without such operations.

Copies of Marsh's report, "Limits of Liability 2007," are available through local Marsh offices or by telephoning Donna Mohan at 212-345-5343.

Special Reports /

Report: Coverage Limits Stay Steady Despite Price Drop

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