Commercial Insurance Markets Showing More Pricing Stabilization

NU Online News Service, April 16, 3:28 p.m. EDT

Commercial property-casualty insurance market rates continue to show signs of stability as premium price reductions continue to moderate, according to a survey of major insurance brokers.

The Council of Insurance Agents & Brokers released its quarterly survey of its members that finds average rate declines for the first quarter of this year stood at -5.1 percent, slightly better than the fourth quarter's decline of -6.4 percent. That was the first time in the surveys that the average declines fell below double digits since the first quarter of 2007.

"We saw some rates creeping up as the impact of the weak economy and increases in reinsurance took hold in the primary market," said CIAB President Ken A. Crerar in a statement. "It was by no means a dramatic turnaround and insurers continued to be very competitive out there, but the line on rates appeared to be holding, particularly on renewals."

According to an analysis done by Barclays Capital Equity Research for the survey, all size accounts in terms of commission and fees saw the rate of decline moderate.

The rate of decline for small accounts improved from -4.2 percent in the fourth quarter of 2008 to -3.3 percent in the first quarter of this year. Medium size accounts saw overall decreases improve from -7.1 percent to -5.6 percent. Large accounts, defined as more than $100,000 in commissions and fees, improved from negative -8 percent to -6.4 percent.

The CIAB noted that a few lines saw increases, such as directors and officers where 28 percent of the 103 respondents said premiums increased 1 percent to 10 percent, an increase from the fourth quarter where only 17 percent said premiums increased in that range. Thirty-four percent said they saw no increase while 17 percent reported decreases in the range of -1 percent to -10 percent.

More brokers also said broker errors and omissions increased in the range of 1 percent to 10 percent, with 15 percent reporting an increase in that range compared to only 6 percent in the fourth quarter of 2008.

More brokers also reported 1 percent to 10 percent increases in the commercial property line (17 percent for first quarter 2009 compared to 7 percent fourth quarter 2008), flood insurance (16 percent first quarter 2009 compared to 7 percent fourth quarter 2008), employment practices (17 percent first quarter 2009 compared to 5 percent fourth quarter 2008) and surety bonds (12 percent first quarter 2009 compared to 3 percent fourth quarter 2008).

The CIAB said among the brokers top concerns were the increasing costs of doing business and competition with other players in the market, health insurance reform and insurer insolvency.

Ninety-eight percent of those surveyed said the economic crisis and soft market are affecting their business, driving down exposures and the amount of money clients can spend on insurance.

The top political issue remained the economic crisis, CIAB said, with 97 percent of those surveyed listing it as their number one concern. The budget/trade deficit and foreign policy were among their other top concerns.