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

The cost of health care organizations' insurance premiums for workers' compensation and directors and officers liability fell in the past year, but property insurance edged upward, according to a brokerage report.

Chicago-based insurance brokerage Aon said in its "2009 U.S. Industry Report: Healthcare" that workers' comp premium averaged a 5.9 percent decrease over the past year. For private/nonprofit hospitals the price per million of limit for D&O insurance dropped 6.5 percent.

Casualty risks are expected to experience continued softness in 2010, the report continued, as good risks can continue to see flat to single-digit decreases.

On the property side, Aon said there would be "continued moderation in upward rate pressure" primarily based on the outcome of the hurricane season. With no major losses in 2009, competition will begin to heat up through the fourth quarter of 2009 and into 2010.

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

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

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

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

The report also found that those health care institutions that elect to utilize captives to control their risks do so for primary and excess professional liability. The report said that 64 percent of the captives underwrite primary professional liability coverage and 52 percent cover excess.

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

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

The report noted that most health care organizations have not changed their retentions compared to the prior policy period.

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

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

Special Reports /

Hospitals See Coverage Costs Drop, Aon Finds

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