Marsh Reports Rate Drops Up To 20%

The U.S. insurance market is continuing its downward trend across all lines of business with rate decreases hitting 20 percent for a few lines of business, according to executives with Marsh.

In its ongoing series of seminars on risk topics, five executives with the insurance brokerage firm Marsh, a subsidiary of New York-based Marsh & McLennan Companies, discussed the overall declining market.

"It's good for clients but challenging for underwriters," said Robert Howe, leader of Marsh's global property practice.

On the property side, Mr. Howe said the property market overall is soft. Clients will see continued lowering of premiums prices and better terms on renewals.

He said over 70 percent of Marsh clients saw rate reductions exceeding 5 percent, with median reductions over 10 percent. An account with a good loss record could see reductions as high as 20 percent, he said.

For property accounts with terrorism risk, he said the take-up rate for clients is stable at 60 percent, and in some regions the take-up, or purchase, rate is as high as 85 percent. He said, however, there needs to be resolution over the Terrorism Risk Insurance Act in Congress to keep the insurance available and affordable.

Joseph DeChiaro, managing director with Marsh's global casualty practice, said casualty is soft with renewals flat to reductions of 15 percent. There is a lot of competition in the marketplace with more admitted carriers writing business that was solely written by nonadmitted markets.

He said companies are adjusting terms to capture new business, but legacy issues are keeping some from taking advantage of the soft market to the fullest.

He noted that on workers' compensation coverage, inflation and medical care expense are increasing, but many large states are decreasing rates with better control of claims and regulatory reforms. Reductions fall in line with overall soft market rates and beyond in some cases, he noted.

Pricing on environmental programs is soft, on some lines down as much as 15 percent, said Chris Smy, leader of Marsh's global environmental practice. He said more insurers than ever are offering programs as businesses find increased regulation around the world. There is also some growing concern for certain exposures such as silica, welding rod fumes and others.

Eugene "Tripp" Sheehan, Marsh's national D&O practice leader, said "there is an abundance of stable capacity" in the marketplace." Very attractive risks with very good loss records can expect decreases ranging from 10-to-20 percent, said Mr. Sheehan.

There are some storm clouds out there, such as the back-dating stock scandal and fallout from the subprime mortgage market, but no dramatic impact at this point, he said.

The trend is more underwriting flexibility, said Mr. Sheehan, as insurers aim to preserve their gross written premium.

More midsize private employers are purchasing employers practice liability, which is experiencing decreases of 10-to-15 percent, he observed. He said with renewals some insurers are offering training programs that are often required as part of an employee settlement.

A rebroadcast of the seminar will be available at www.marsh.com under news features and articles.