NU Online News Service, April 16, 10:33 a.m. EDT

Now in its seventh year, the soft market shows few signs of loosening its grip on commercial insurance pricing, according to the RIMS Benchmark Survey.

Average premiums in every line tracked by the survey fell in the first quarter. Forecasts for an above-average hurricane season, however, may signal rising premiums on the horizon, according to the report administered by Advisen Ltd.

"Insurance capacity is abundant throughout the commercial lines market, but the lingering impact of the global recession has reduced the demand for that capacity," Dave Bradford, Advisen executive vice president said in a statement. "Abundant capacity coupled with diminished demand keeps downward pressure on rates. As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims always are a wild card in the pricing cycle."

As has been the case throughout much of the soft market phase, the report said, general liability was the most competitive line during the quarter, with the average premium falling 4.4 percent.

The average property premium, which had been essentially flat over the past several quarters, fell 2.9 percent. The average workers' compensation premium was down 2.0 percent, and average directors and officers liability (D&O) premium was off 1.1 percent. D&O average premium had been flat to slightly higher throughout 2009 due to rate increases in the financial institution sector, but those increases now have abated, according to the report.

"Rate levels are down, but insurers nonetheless posted good results in 2009," said Robert Cartwright, loss prevention manager for Bridgestone Americas Holding, Inc. and a member of the board of directors for the Risk and Insurance Management Society. "As a result, underwriters have not been highly motivated to push for higher premiums. That certainly is good news for risk managers. Forecasters are calling for an active hurricane season this year, though. Large catastrophe losses could cause prices to increase across the board."

Colorado State University hurricane forecasters are calling for 15 named storms, eight hurricanes and four major hurricanes in 2010.

While risk managers and other commercial insurance buyers are benefitting from lower premiums, insurance brokers are suffering from the double whammy of lower rates and reduced premiums levels resulting from the lingering effects of the recession. Much of brokers' revenue is tied directly to the volume of premium placed with insurers.

Some types of insurance policies calculate premiums based on factors such payroll and revenue, which have fallen substantially as an outcome of the recession. Workers' compensation premium volume, which is based principally on payroll, has been particularly hard-hit by the economic downturn. Consequently, many brokers have been forced to streamline operations and reduce headcount to maintain profitability, the report said.

Special Reports /

Soft Market Continues To Erode Insurance Premium

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