RIMS Study Finds Market Softening
NU Online News Service, Nov. 4, 12:00 p.m. EST?Commercial insurance buyers experienced only moderate price increases for many major coverage lines during 2003′s third quarter, according to a survey of market conditions.
The RIMS Benchmark Survey, which includes data from more than 1,000 insurance-buying organizations, was released today by the New York-based Risk and Insurance Management Society, Inc.
"After the staggering increases we have seen in recent quarters, especially from professional liability lines, the market for many lines appears to be moderating," Christopher Mandel, RIMS vice president, chief risk officer and secretary said in a statement.
"These results are the clearest indication of a market shift," noted Thomas P. Ruggieri, CEO of New York-based Advisen Ltd., which analyzed and summarized the survey results. "They come from the buyers of insurance and are a real-time insight into the market conditions risk managers face today," Mr. Ruggieri added.
Property coverage, fiduciary liability, and directors and officers liability, which had previously been experiencing large increases, faced comparatively moderate rate hikes in the third quarter, according to the survey.
On the other hand, excess liability and workers' compensation faced comparatively strong increases. Premiums for these lines rose between 3 and 32 percent compared to last year.
"The drop in policy counts we reported last summer was an early indicator of a broadening of capacity, and we believe the retention levels in some lines may begin to drop, but in some cases like professional lines, will remain high compared to historical levels," Mr. Mandel of RIMS said. "It's too early to say it definitively, but the hard market appears to be ebbing."
Retention level increases ranged from 8 to 25 percent, except in fiduciary liability, where increases averaged 250 percent. This suggests insurers are pushing retentions higher to reduce loss ratios, even as they maintain hard market levels of premium rates, according to RIMS.
In fiduciary liability insurance, underwriters are clearly signaling a growing unwillingness to participate in risk sharing at previous levels of risk transfer, the statement noted.
The increases in policy counts also slowed significantly, even showing declines in property insurance policy counts, evidencing continued signs that the hard market is softening, according the RIMS statement. Policy counts reflect the number of policies required to complete a desired level of insurance coverage.
"Risk management professionals can leverage this data to make clear decisions, because it comes from their peers, rather than from potentially biased, sell-side market speculation," Advisen's Mr. Ruggieri said.
For more on the benchmarking survey, see http://rims.advisen.org.
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