Commercial lines insurance premiums continued a downward trend during the fourth quarter of 2007, according to the Risk and Insurance Management Society Benchmark Survey of policy renewal prices as reported by corporate risk managers.

Despite concerns about lawsuits over stock declines arising from the continuing crisis in the subprime mortgage market, the average directors and officers liability (D&O) premium rate fell 11 percent in the fourth quarter.

This far outstripped decreases in other lines of business tracked by Advisen for the RIMS Benchmark Survey.

"The big surprise is a big fall in D&O liability premiums--in light of the whole subprime meltdown," David Bradford, editor-in-chief of Advisen in New York, told National Underwriter.

"We dug into the financial institution marketplace a little bit deeper, and as far as we can see, there's really been no reaction from D&O insurers in terms of any knee-jerk rate increases across the board for these companies."

He added, "I also think there is a fairly prevalent belief that a lot of these cases are going to be dismissed and that there are some pretty strong defenses--it probably won't be as much of a catastrophe as it might seem on the surface."

Mr. Bradford said there may be some increases in the first quarter for this segment of the marketplace, "but so far it's been pretty calm."

He said there also have been decreases for commercial property (-1.3 percent) across the board. "The anecdotal information we're getting from risk managers is that underwriters are much more willing to talk about rate decreases in catastrophe-prone areas than they have been in the past."

The persistent soft market also continued to wear away at pricing in general liability (-3 percent). After falling sharply in 2006, due largely to reform measures in several large states, workers' compensation premiums continued the more moderate trend seen throughout 2007. The average workers' compensation premium fell 1.4 percent during the quarter.

"Overall, 2007 was a good year for risk managers--certainly as it relates to the cost of insurance," said John R. Phelps, member of the RIMS board of directors and director of business risk solutions for Blue Cross and Blue Shield of Florida Inc. "The downward pricing momentum in the fourth quarter, especially in D&O, suggests that the soft market still hasn't hit bottom."

Mr. Bradford said that despite price declines insurance companies are still posting "very good results and probably will end the year with an underwriting profit."

He noted that this should "further stimulate competition and buyers can look forward to yet lower insurance costs. But the soft market will eventually take its toll on insurer earnings--maybe starting as early as the second quarter of 2008."

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