NU Online News Service, May 11, 11:53 a.m.EDT
|The Risk Management Solutions Version 11 catastrophe model isshifting rates higher, and causing some risks to move from theadmitted market back to excess and surplus lines carriers, but aleader of a managing general agent group cited concerns with themodel's impact on how insurers underwrite risks.
|At the 86th annual meeting of the AmericanAssociation of Managing General Agents this week, Immediate PastPresident Mark Rothert says RMS 11 has had some impact on theavailability and cost of reinsurance, causing some risks to moveout of the admitted markets.
|AAMGA President Wayne G. Forest says a troubling developmentwith RMS 11, though, is that it is causing insurers to turn downbusiness, even risks that have been profitable for them for years,due to the increases in aggregate exposure shown by the model.
|Forest's concern is that underwriting is being taken out of thehands of people and is now subject to a computer program.
|He also says that while companies and agencies will benefit fromthe rate increases, entrepreneurs will be left to decide if theycan afford coverage or go without.
|Forest says he believes the revised model will cause rates torise in catastrophe-prone areas by 3-4 percent, and couldeventually rise as much as 10 percent in some cases. He alsobelieves some of that rate increase will be mitigated with higherdeductibles.
|Regarding property rates in general, Rothert says there isfluctuation in pricing depending on the region of the country arisk is in.
|AAMGA President-elect R.C. Chaffin says rate movement in themarkets will be gradual, without the spikes seen in the last hardmarket in 2006. In Florida, where he is based, the markets areshowing such movement, led by the state's insurer of last resort,Citizens Property Insurance Corp.
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