Property insurance rates increased by as much as 33 percent in the fourth quarter of 2005, with a median increase of 8 percent, according to the Risk and Insurance Management Society's Benchmark Survey.
The increase reversed a two-year trend of steadily falling property insurance premiums, the comprehensive survey of current policy renewal prices reported by corporate risk managers and produced by Advisen Ltd. found.
The insurance market "shrugged off the record hurricane losses of 2004, but the combined impact of Katrina, Rita and Wilma was clearly more than the market was ready to absorb in 2005," Karen Beier, a member of the RIMS board of directors, holding the membership and chapter services portfolio, said in a statement.
"So far it seems only property insurance has been affected, but it remains to be seen if the rise in property rates will be the catalyst for an overall upturn in prices and a harder market," she added.
However, Advisen is still fairly bullish on market conditions remaining generally favorable for risk managers.
"We can speculate, but a logical explanation is that the market is still fundamentally very competitive," David Bradford, editor-in-chief at Advisen in New York, told National Underwriter.
"Despite the fact that we had tens of billions of dollars of hurricane losses this year, it still looks like the industry, overall, is going to turn a profit for the year and is actually going to come out with a stronger capital position than it began the year with," he added.
The reason property coverage was affected while other lines were not, he added, is that "we're seeing a knee-jerk reaction to the catastrophe losses in property, but the underlying competitive state of the market really hasn't changed. This leads us to believe this spike we see in property is probably not going to be sustainable."
He predicted the rise in rates shouldn't last "more than a quarter, unless something else changes in the underlying numbers."
He also noted that he did not see increases migrating to other lines because "the [industry's] capital position is just too strong right now." This he attributed partly to an influx of funds following Hurricanes Katrina, Rita and Wilma, estimated by Advisen to cost the insurance industry nearly $58 billion.
The survey found that directors and officers liability renewals were flat, while general liability renewals were down 3 percent.
Mr. Bradford noted that while flat, D&O coverage "had been falling, but that's more or less what we expected." D&O, he said, is a segment of the market that has seen "hardening in some areas and some softening in others, and it eventually reached that flattening-out point."
The RIMS Survey includes information from nearly 42,000 corporate insurance programs. Advisen collects and analyzes the data and provides the technology infrastructure for the survey's online services.
Risk managers contributing insurance schedule data to the survey can benchmark both the structure of their commercial insurance programs and the cost of insuring their risk against a highly-relevant group of similar companies, according to the New York-based RIMS. For more information, go to www.RIMS.org/benchmark.
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