All Sectors Hit With Price Hikes On Tough July 1 Renewals: Brokers

"Capacity is there, but pricing is certainly up," he added.

Very hard-to-place risks were terrorism exposure for high rise buildings in big cities considered high profile, Mr. McSweeny noted. However, in lesser-exposed areas, there was competition among carriers making placement easier, he observed.

"I cant think of a sector of the market that was not getting hit with price increases," commented Charles L. Rouff, senior vice president and chief marketing officer for Chicagobased insurance broker Acordia, a subsidiary of Wells Fargo Co. headquartered in San Francisco.

"If someone received a 20 percent increase, [that client] almost said Thank you and put it away in the hope that it would be better next year," said Mr. Rouff.

Clients are taking bigger deductibles or not taking excess limits that they have in the past. But they are limited in what they can do to mitigate the increases, which translates into cutting back at either "the top or bottom end of coverage," noted Mr. Rouff.

"There is little to do but ride it out," Mr. Rouff remarked.

One notable problem area, he said, is California, where workers compensation capacity continues to diminish–and where he speculates up to 60 percent of the market could end up in the state fund.

On average, Mr. Rouff said, increases were running in the 20-to-30 percent range for many lines throughout the market at July 1.

In areas of excess liability and umbrella, increases ranged close to 40 percent, Mr. Rouff said. He said there were a few odd cases where prices doubled on a risk, but it was not the standard.

"Every underwriter is narrowing its focus," said Robert Lockhart, regional director, Northeast region for Hilb, Rogal & Hamilton Co. based in Glen Allen, Va. He said carriers were concentrating on renewing those accounts that have been very good and profitable for them for some time, but "tough accounts in a good class, and good accounts in a tough class were being pushed out to the excess and surplus lines."

And for customers, this translates into less coverage, higher deductibles and more price, he said.

For the middle market account, Mr. Lockhart observed, this can be a difficult choice, especially for a business that has been paying for coverage with a $1,000 deductible that must now absorb a $25,000 deductible in order to get affordable coverage.

He noted that large property accounts are seeing increases in the range of 50-to-75 percent.

Some of this pricing, Mr. Lockhart observed, could in the long term cause resentment on the part of customers who may feel companies are taking advantage of the situation. This is especially true where quotes come in at the last minute from a carrier and are higher than anticipated. These customers, he suggested, could be lost permanently to the alternative markets.

"Those people who feel they have been treated in that fashion will respond," Mr. Lockhart noted. He added, "Business that has been driven out [of the traditional market] will not come back."

Even the worlds largest broker, New York City-based Marsh, had little in the way of encouraging news for clients.

On the property end, Robert Howe, managing director on property placements in the United States, said increases averaged out at 75 percent across the country, emphasizing that this average could be misleading because individual rate increases varied substantially.

He said there is a lot of pressure on clients with complex risks or capacity demands. It was especially difficult for clients looking for limits at $1 billion dollars or more.

New capital coming into the markets has helped, Mr. Howe said. It has not been enough "to influence the trend, but it certainly has been welcome by our clients."

As for the future, the expectation is continuation of increases, but maybe not as sharp a spike as in the past.

Long term, while the rate of increase might be expected to decline after Jan. 1 next year, "any prospect that there would be a back off in the current prices is not going to happen," Mr. Rouff observed.

"We do not see it getting worse on the amount of increase, but it is not going to back off to any significant degree."

"It was a very tough season, but we got our renewals placed," said Willis Mr. McSweeny, summing up the feeling of many brokers. "It was a lot of extra work" because brokers needed to use a lot more markets to get things done, he said, noting that every insurer "is providing slightly less capacity per company."

"You needed to bring a lot more players in to get the deal done. It was a tough July 1," he said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 22, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.