NU Online News Service, April 20, 11:22 a.m. EDT
ORLANDO, FLA.–Despite the economic crisis, insurance buyers can expect flat rates overall into the fourth quarter, according to the latest poll of risk managers.
The RIMS Benchmark Survey of policy renewal prices reported by North American corporate risk managers was conducted by Advisen.
Data from the survey corroborates Advisen's recent forecast that a dramatic shift to higher rates is unlikely and that due to the impact of the recession, commercial insurance buyers will see a more gradual hardening of the market.
Insurance premiums for businesses continued to slide toward a "soft landing," Advisen said, rather than an abrupt reversal resulting in rate increases.
While banks and other financial institutions bought directors and officers (D&O) insurance at substantially higher rates, the rest of the commercial insurance market in the first three months of 2009 saw a continuing trend of little or no change in rates, according to the survey.
"It's a mixed bag," Dave Bradford, Advisen's executive vice president and editor-in-chief of RIMS Benchmark Survey, told National Underwriter. "We still see general liability and workers' compensation drifting down a little. Property is pretty much flat and D&O is up a bit, but that's driven entirely by the financial services sector."
He added that rate decreases are still being seen in the commercial D&O area. "Unless there's a big catastrophe, we don't think rates are going to turn drastically."
Mr. Bradford expects there will be some firming, but "nothing dramatic," noting there is "still a lot of capacity in the market place. It's still a competitive market and we'll probably continue to settle into a soft landing over the next quarter or so before we start seeing any material hardening in rates."
In the property sector, he added that while the survey found rates were "dead flat" in terms of the averages, "behind that was quite a bit of activity, both on the upside and the downside, and clearly there's more pressure on properties in catastrophe-exposed areas. That's where we're starting to see the hardening taking place."
Another factor is that reinsurers are starting to push up catastrophe premiums, he said. "That's going to trickle down to the primary pricing as well."
The survey found that general liability premiums fell 3.8 percent for policies renewing during the first quarter of 2009, as compared to a 5.9 percent decline in the fourth quarter of 2008. The average workers' compensation premium fell 2.5 percent–similar to price decreases over the past several quarters.
The average property renewal was flat for the first quarter as compared to a decline of 3.8 percent in the fourth quarter of 2008. While there was a wide range of changes in recent renewal premiums for individual property risks, premium changes ranged from a decrease of 11 percent to an increase of 14 percent.
The D&O market continued to be split between financial institution risks and all other commercial risks, according to the survey. Overall, the average D&O premium increased by 3 percent, but the increase was driven entirely by financial companies. Excluding financial firms, the average renewal was down 3 percent.
Higher financial institution premiums are the outcome of massive losses from the meltdown of the subprime mortgage market and the ensuing credit crisis. By comparison, overall D&O rates fell 1.2 percent in the fourth quarter of 2008 and fell 4.5 percent during that period excluding financial firms.
"Most risk managers continue to see flat or slightly lower premiums at renewal," said Daniel H. Kugler, member of RIMS' board of directors and assistant treasurer, risk management at Snap-on Inc., from the RIMS Annual Conference in Orlando.
"The insurance market is still very competitive and, while some insurers are predicting an imminent hard market, there are few signs that rates will rise sharply any time in the near future," commented Mr. Kugler.
Risk managers and buyers of insurance either contribute directly to the RIMS Benchmark Survey or by using RIMS' "data participation letter" to authorize their broker to provide the client's program details.
The letter is available online at www.RIMS.org/brokerform or by calling 800-655-6590. Risk management professionals can also contribute by e-mailing current and prior-year policy schedules to Benchmark@RIMS.org or by faxing to 212-655-7453.
Risk managers who contribute data to the survey can benchmark the structure of their commercial insurance programs, retained loss costs, exposure demographics and total cost of risk (TCOR) against a highly relevant group of peer companies.
Additionally, survey respondents can use software personalized and configured for their needs to view detailed schedules of insurance, programs for current and past years, and full-color program tower charts.
Both benchmark charts and program charts can be downloaded. Results of the survey are available online or in an annually published book. Visit www.RIMS.org/benchmark for details.
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