Commercial insurance premium rates continue their downward slide, but there were indications the market decline is leveling off, according to a survey taken before the financial crisis deepened.
The Council of Insurance Agents & Brokers released its third-quarter 2008 Commercial P-C Market Index Survey today saying that for small and midsize accounts, there are suggestions that pricing leveled off during the third quarter.
But the fourth quarter may tell a different story, the CIAB suggested, because the survey was taken at the beginning of October, so the financial crisis and the near collapse of insurance giant American International Group were not reflected in the findings.
"We won't know until January 2008 renewals what toll the economic crisis has taken on the industry in general," CIAB President Ken A. Crerar said in a statement.
"What we do know is that investment income is down dramatically, carrier profitability is being eroded, net underwriting losses are higher and combined ratios are inching up over 100. How long carriers can maintain price cuts without damage to their financial health is anybody's guess," Mr. Crerar remarked.
A total of 95 major insurance brokers and agents responded to this quarter's survey.
The CIAB said that during the third quarter, 69 percent of the commercial agents and brokers responding to the survey reported that premiums for their small account renewals were down only slightly (10 percent or less) compared with similar renewals during the second quarter, including 20 percent who reported no change.
Fifty-three percent of the respondents said their medium account premiums were down 10 percent or less compared with second-quarter renewals, including 7 percent reporting no change.
Premiums for large accounts, which escalated the most and the fastest during the hard market cycle, were still dropping, the survey showed.
Twenty-nine percent of the respondents said their large account renewal premiums were down up to 10 percent compared with the previous quarter, while 8 percent reported no change. Thirty-five percent reported renewal premiums down 10-to-20 percent, and 18 percent said premiums were down 20-to-30 percent compared with the second quarter.
An analysis of the CIAB's survey findings by Barclays Capital Equity Research said premiums for the average commercial account declined 11 percent during the third quarter.
For large accounts, the rates were down 13 percent; for medium accounts, renewal premiums dropped 12 percent compared with the second quarter; and for small accounts, the renewal premiums averaged an 8 percent decline.
Individual brokers surveyed said competition remains strong, with more appetite for risk. Some said they see signs of stabilization depending upon loss history. However, the economic crisis may be driving more claims activity, according to the brokers.
Asked their top three industry concerns, the brokers said price competition and excess capacity, insurer solvency, and competition among brokers, the CIAB said. They listed their top three political concerns as the economy–credit crisis, the budget deficit and foreign policy.
Some survey respondents reported that the recent government rescue of insurance giant AIG was spurring new competition for commercial business, but there was general agreement that the sour economic conditions and Wall Street meltdown at the end of the third quarter had not yet affected the market.
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