Property insurance was the only line of business that increased in the third quarter, representing a continuation of trends in the past two quarters, according to the Risk & Insurance Management Society (RIMS) Benchmark Survey.
The survey is a comprehensive industry study of current policy renewal prices as reported by corporate risk managers.
Property insurance increased in the third quarter by 1.7 percent. Although the rise in property insurance premiums seems modest, it masked the sharp increases that continue to affect businesses with properties in regions exposed to hurricanes and earthquakes, the survey found. Conversely, property owners in regions not prone to natural catastrophes continue to see falling premiums.
"We've seen this same phenomena for the past three quarters, that rates are going up sharply," David Bradford, editor-in-chief at Advisen told National Underwriter. "First in hurricane-exposed areas and more recently in earthquake-exposed areas. But there's still slipping in the non-catastrophe exposed areas."
Mr. Bradford added that commercial property is being "clobbered" on both hurricane and earthquake, especially in California.
"Actually the [California] residential has gotten a rate cut as of June 1 on earthquake," he said. "The California Earthquake Authority cut rates by 22 percent, while commercial is seeing everything go up by massive amounts."
Overall, he said, the survey results are good news for insurance buyers in that, "With the remarkably profitable season that's shaping up and the reports that we're starting to get, anecdotally, out of Florida now, we've probably peaked on the catastrophe rates in the coastal areas, and we'll probably see that start to settle down."
The line to watch, he noted, is directors and officers. "It's been a very dynamic area, there's a lot going on there," he said. "Growing capacity in the marketplace, combined with the fact that it's turning out to be a rather remarkable year in the D&O arena for frequency of securities class action suits–it's going to get very competitive."
Directors and officers (D&O) and general liability premiums decreased by less than one percent in the third quarter, according to the report, though competition for small- and mid-size D&O accounts remained intense, the survey found.
In the first half of 2006, the property-casualty industry reported an underwriting profit of $15.1 billion, a 31.8 percent increase over the same period in 2005, which may lead it to report record profits for the full 2006 calendar year, absent any major catastrophes. Policyholders' surplus, the measure of insurance industry capacity, grew 2.7 percent. Advisen forecasts that this additional capacity may fuel competition within the industry, which would encourage insurers to decrease premiums.
"Unless you own property on the coast or along a fault line, it's increasingly a buyer's market, and market conditions should continue to improve for risk managers," Mr. Bradford said in a statement. "It looks likely that 2006 will be a banner year for the property and casualty insurance industry. A profitable year will encourage insurers to further cut prices."
Another area of interest, workers' compensation, premiums dropped by nearly 3.4 percent, reflecting the impact of reform measures in large states such as California and Florida.
Risk managers who contributed 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 peer companies, RIMS said.
Additionally, survey respondents can use software personalized and configured for their needs to view detailed schedules of insurance, programs for current and past years, and full-color program tower charts. Both benchmark charts and program charts download into any presentation for senior management.
The results of the RIMS Benchmark Survey are available online or in an annually-published book. Visit www.RIMS.org/benchmark for details.
The RIMS Benchmark Survey is produced by Advisen, Ltd., which collects and analyzes the data and provides the technology infrastructure for the survey's online services. Risk management professionals can contribute to the survey by e-mailing current and prior year policy schedules to Benchmark@RIMS.org or by faxing to (212) 655-7453.
During the last quarter, Advisen introduced an additional way to help risk managers contribute to the RIMS Benchmark Survey. The "Broker Authorization Letter" enables risk managers and insurance buyers to contribute by designating their broker to provide the client's program details. The letter is available at www.rims.org/brokerform or by calling (800) 655-6590.
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