NU Online News Service, June 15, 12:21 p.m. EDT
Commercial property-casualty insurance saw the smallest price decline in four years, according to a survey by consulting firm Towers Perrin in Stamford, Conn.
Towers Perrin said the finding in its most recent commercial lines insurance pricing and profitability trends survey (CLIPS) showed prices fell less than 1 percent and provides "increasing evidence that the soft market is reaching its end."
While first quarter p-c prices for the most part were nearly flat, the firm said the directors and officers liability insurance line was among segments showing increases.
First quarter prices for large D&O accounts, those with annual premiums in excess of $50,000, increased; an upturn Towers Perrin said is not surprising, as large account prices eroded substantially more than middle-market and small accounts in 2007 and 2008.
The firm found that by contrast small-account commercial prices continued their pattern of steady, but smaller, decreases.
None of the surveyed lines, Towers Perrin said, saw a deepening of price reductions from the fourth quarter of 2008 and, for lines where prices fell, all first quarter decreases were in the low single digits.
Stephen Lowe, managing director of Towers Perrin's global property & casualty insurance consulting practice, said, "Premiums in many lines may be falling faster than prices in some segments of the market – because lower payrolls, receipts, miles driven and other measures of exposures are declining due to the current economic climate. This reduced exposure from economic conditions may account for some of the disparity between the CLIPS survey results and the surveys published by the insurance brokers."
He added that, "More qualitatively, anecdotal evidence indicates that property insurance prices are continuing to rise in catastrophe-prone areas and declining slightly in non-catastrophe areas. This trend reflects the continuing high cost of property catastrophe reinsurance."
Year to date through the first quarter, CLIPS data indicate that accident-year 2009 loss ratios deteriorated 11 percent relative to 2008.
Towers Perrin said this deterioration comes on top of an estimated deterioration for accident-year 2008 of 9 percent over 2007. Increases in claim costs and the "earning" of the price decreases taken in the last four quarters both contributed to loss ratio deterioration for 2009, according to the survey.
CLIPS data, said Towers Perrin, is based on both new and renewal business figures – when available – obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.
The firm said this particular survey compared prices charged on policies underwritten during the first quarter of 2009 to the prices charged for the same coverage during the same quarter in 2008.
Survey participants include a cross section of U.S. p-c insurers with many of both the top 10 commercial lines companies and the top 25 U.S. insurance groups CLIPS' measurement of both pricing changes and loss ratio changes also sets it apart from other studies, according to Towers Perrin. Currently 33 commercial insurers participate in CLIPS.
The company said participation in CLIPS has been increasing, as "carriers believe it provides a more accurate picture of price changes and find it useful in setting assumptions for estimates of their claim liabilities."
The survey results track the differing trends in pricing across various regions, lines of business and account sizes on a quarterly basis. Historically, price level and loss ratio change results vary considerably by line of business and market segment, said the company.
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