CIAB: Cat Rates Up As Other Lines Soften

Twenty-six percent of small accounts saw no change in rates, while 11 percent of both medium and large accounts saw no change.

Looking at individual lines, 43 percent of the brokers said commercial property premiums dropped 1-to-20 percent, and 21 percent said they rose 1-to-20 percent, with 10 percent saying there was no change.

Nine percent said commercial property rates rose between 20- and 50 percent, and 13 percent said rates were up 50-to-100 percent.

An analysis of the data by Lehman Brothers showed commercial property had an overall increase of 9 percent, while other lines were in negative territory.

However, CIAB said premium rates for catastrophe-prone coastal property risks were up 300-to-500 percent–even as much as 600 percent in some cases. The impact, the association added, was being felt as far as five miles inland, according to the survey.

Regionally, the Southeast and Southwest appeared to be showing the bulk of the increases for commercial property.

In the Southeast, 38 percent of brokers said rates rose 50-to-100 percent, and in the Southwest 12 percent said they saw the same level of increase.

Twenty-one percent in the Southeast said rates rose 20-to-50 percent, and 12 percent said rates rose between 1- and 20 percent. No broker reported unchanged property rate premium, but 16 percent in the region said rates were down in the range of 1-to-20 percent.

In the Southwest, 20 percent said there was no change, while 24 percent said rates increased 1-to-20 percent, and 12 percent said rate increases ranged from 20-to-50 percent. Twenty-eight percent said rates were down 10-to-20 percent.

Separately, Jill Dalton, managing director in Marsh's North America property practice, also said property risks are dealing with two extremes depending on geographic location and insurer appetite.

Speaking during a Marsh Webcast last week, "Property-Casualty Insurance–Market Update–Third Quarter 2006," she called today's commercial property market "bifurcated."

She said catastrophe risks are seeing increased deductibles, reduced limits, higher pricing and coverage restrictions. The experience is worst for clients in hurricane-prone areas, but those in earthquake-prone areas are "catching up," Ms. Dalton reported.

On the other hand, those with little or no catastrophe exposures are enjoying intense competition, experiencing rates varying between 10 percent reduction and 10 percent increase.

Clients with 10-to-50 percent of their property value in catastrophe-prone areas can expect rate increases between 20- and 50 percent.

Those with more than 50 percent of property valued exposed to catatstrophes experienced rate increases of more than 50 percent, going as high as 100 percent.

Policyholders in the catastrophe areas are also getting hit with increased deductibles, reduced limits and gaps in coverage.

To illustrate the dramatic changes in property rates, Ms. Dalton said that a year ago, 87 percent of Marsh clients received rate reductions compared with 16 percent as of June 1.

Adding to the pressures are concerns over terrorism, as insurers are writing exclusions into policies when the Terrorism Risk Insurance Act sunsets in December of 2007. There is growing concern in certain areas over this risk, especially Midtown Manhattan and Toronto, Canada.

Some clients with international property risks might consider breaking their plans up and insuring those properties overseas, Ms. Dalton noted. European-only risks, along with parts of Asia and China are competitive, but European companies with holdings in the United States in catastrophe areas are experiencing the same difficulties as U.S. companies.

A replay of the event is available at www.marsh.com under risk reports.