The environmental insurance market will remain robust in 2007, and available construction-related pollution and professional liability products have buyers' attention, a specialty intermediary firm for retail agents and brokers contends.
The forecast came in the “New Day Underwriting Market Update 2007,” produced by New Day Underwriting Managers LLC of Bordentown, N.J.
Among its findings:
o During 2006, available contractors pollution liability capacity exceeded $300 million, with the most any one carrier could offer remaining at $50 million.
o Buying motivators for CPL typically fall into four categories–contractual requirement, asset protection, regulatory requirements and loss events. Contractual requirements have always been and continue to be the primary driver to buy.
o The market appears to remain relatively flat, with increased charges for high-risk activity and extensive form modification.
o As a result of a “softened” market, carriers appear more willing to offer enhancements rather than reduce price.
On contractors professional liability:
o Today, approximately 15 domestic and foreign carriers are willing to offer various forms coverage with a variation of underwriting appetites.
o Annual premiums are estimated at approximately $250 million and growing at a rate of about 15-to-20 percent each year.
o The professional liability marketplace continues to move back to profitability. Even though the past three-to-four years appear to have been profitable for many, rates still seem to be increasing.
o Rates will typically track with standard professional liability market rates, with up to 10 percent rate increases expected for 2007 on accounts performing well (that is, low losses). Rate increases will vary based on the carrier.
o Rates are increasing modestly, but premiums are increasing as greater rate revenues and exposures increase for many growing contractors.
o Many contractors are experiencing, on average, revenue growth of 25-to-40 percent. This appears to include firms generating hundreds of millions of dollars in revenue, and this revenue growth has a significant impact on the overall cost of their programs.
o Combining all domestic and foreign markets, available capacity remains approximately $150 million for each claim/aggregate limit, with $25 million for each claim/aggregate the most any one carrier can offer.
o While no insurance carriers are expected to exit the market in 2007, there is a strong possibility for new entrants to enter, especially entertaining the middle market.
o The two reasons motivating buyers are contract requirement and asset protection, although another emerging trend is the owner's or general contractor's requirement of a contractor to purchase coverage, regardless of whether or not the firm is providing professional services.
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