London Pro Liability Premiums Drop To 1999 Levels

Premiums across all financial, executive and professional lines of insurance are decreasing to the levels seen in 1999 and 2000–the low point of the last soft market, according to an insurance brokerage's survey of London market insurers.

Willis Group Holdings in London said its findings are based on a survey asking firms for their views on the underwriting market over the past three months and their predictions for the next three months for three lines.

The survey asked for comment on financial institutions, directors' and officers' liability and professional indemnity risks, and contacted London-based insurance companies.

Willis said its Financial Institutions Index provides buyers of specific lines of coverage with an overview of the market with issues unique to their industry.

For financial institutions insurance, Willis said third quarter data suggests the average premium discount was around 10 percent. Underwriters surveyed by Willis are predicting this state of affairs will remain unchanged during the next quarter and possibly even beyond 2008.

Willis found that widespread flooding in England, the sub-prime mortgage crisis and resultant credit crunch have, so far, had little effect on rates in the financial institutions insurance market.

Examining D&O liability insurance, Willis said, over the last three months, 23 percent of insurers reported flat-rated renewals.

Of those insurers reporting reductions, there was an even balance between reductions of up to 10 percent and reductions of up to 20 percent–although in Willis' second-quarter survey the predictions had been skewed towards larger reductions of up to 20 percent.

The majority of D&O insurers surveyed predicted smaller reductions of up to 10 percent in the fourth quarter of 2007.

For professional indemnity insurance, Willis found a continuing reduction in rates “across the entire PI arena.”

While insurers surveyed felt that rates could fall to similar lows as the 1999/2000 period, this may not occur for some time, the brokerage said.

The Willis PI Index found that with the increasing market capacity available, insurance buyers can in some cases utilize premium reductions to purchase additional limits.

“It was without doubt a buyer's market for financial, executive and professional risks, and the general consent is that it will continue through to 2008,” said Roland Avery, chairman of Willis Financial Executive and Professional Risks (FINEX).

He added that “sub-prime [problems] and an economic slowdown have the potential to change the landscape dramatically, and we will be keeping a close eye on the marketplace over the next quarter.”

The Willis Financial, Executive and Professional Risks Index is comprised of three quarterly surveys, conducted by Willis' Financial Executive and Professional Risks division.