NU Online News Service, Nov. 2, 1:59 p.m.EST

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The cost of health care organizations' insurance premiums forworkers' compensation and directors and officers liability fell inthe past year, but property insurance edged upward, according to abrokerage report.

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Chicago-based insurance brokerage Aon said in its "2009 U.S.Industry Report: Healthcare" that workers' comp premium averaged a5.9 percent decrease over the past year. For private/nonprofithospitals the price per million of limit for D&O insurancedropped 6.5 percent.

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Casualty risks are expected to experience continued softness in2010, the report continued, as good risks can continue to see flatto single-digit decreases.

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On the property side, Aon said there would be "continuedmoderation in upward rate pressure" primarily based on the outcomeof the hurricane season. With no major losses in 2009, competitionwill begin to heat up through the fourth quarter of 2009 and into2010.

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Professional liability rates were viewed as stable and areexpected to remain stable for the rest of this year, but may hardenin 2010 based on historic indicators that severity is on theincrease at a rate of about 4 percent a year, Aon said.

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Dominic Colaizzo managing director, Aon Healthcare, Aon RiskServices, said in an interview there was nothing surprising in thereport's finding (the first report of this type on this subject forthe industry, he said), only confirmation of their own knowledge ofthe markets direction.

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Long term, Mr. Colaizzo said the report points to a market thatis heading up and he believes that at some point in 2010, therewill be rate hardening, but the degree and timing will be differentfor each line of business. The key will be when carriers realizethey need more money from the individual lines of business becausethe investment returns are not there.

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"We are past the bottom of the soft market cycle," he said. "Nowit is just a matter of how fast this cycle recycles itself."

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The report also found that those health care institutions thatelect to utilize captives to control their risks do so for primaryand excess professional liability. The report said that 64 percentof the captives underwrite primary professional liability coverageand 52 percent cover excess.

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"This is not surprising as these coverages are typically bigticket items and may not be affordable or offer the coverage neededin the standard market," the report said.

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Other lines the captives are adding are general liability,employed physicians, workers' comp, D&O (with no "Side A"included) and primary property.

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The report noted that most health care organizations have notchanged their retentions compared to the prior policy period.

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The captives are also used to fund risk management programs fromtheir surplus, Aon found.

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A copy of the report is online at www.aon.com.

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