NU Online News Service, Sept. 8, 3:53 p.m. EDT
Brokers placing casualty insurance risks find a continuing decline in rates, but other lines are seeing rate increases over this year's second quarter, a report from Aon said.
In its first "Quarterly Market Overview" of second-quarter property, casualty and directors and officers lines, the insurance brokerage analyzed several different insurance sectors using data gathered from its proprietary databases.
Chicago-based Aon said its report represents "placement commercial and large account information from thousands of U.S. companies."
On the directors and officers side, the insurance market analysis is split into two distinct groups: financial institutions and all the rest.
Aon said for financial institutions–covering banks, diversified financials, insurance and real estate–"rates are increasing significantly, capacity is shrinking and coverage terms are tightening." Within this space, Aon said it has become extremely difficult to place risks.
For all other sectors the marketplace is "extremely competitive" as rates are trending down, capacity remain ample, and terms and conditions are the "broadest seen in years." Aon said that new carriers continue to enter this segment. The exception is for industries experiencing a high rate of bankruptcies.
Aon said the average rate for D&O rose 3.1 percent in the fourth quarter of 2008 and rose 4.1 percent in the second quarter of this year, but stood at minus 2.4 percent for the first quarter of 2009.
Overall, Aon said, "D&O rates are expected to stabilize in the short term, with the exception of financial institutions, which will experience further increases."
The property market, on the other hand, experienced "a mild hardening during the first half of 2009," Aon said.
In both the first and second quarter of this year, rates rose more than 4 percent after steady, substantial declines from 2007 through all of 2008.
The combination of higher prices and low losses has been a positive for carriers. However, Aon said it would not call the increases a trend and it will have to wait for the rest of this storm season to see what the impact will be.
For the most part, casualty continued to experience market declines in workers' compensation and general liability, though not as sharply as in the previous quarters going back to third-quarter 2007.
The exception was primary automobile, which rose less than 1 percent in the second quarter of this year after coming in at minus 0.3 percent the quarter before.
Covering umbrella and excess liability, rates were still falling, but not nearly as much as the quarters before. Lead umbrella/excess liability programs dropped 2.4 percent while total program fell 3.3 percent, Aon said.
Of all of the casualty lines Aon examined, more than 90 percent of policyholders of umbrella/excess liability did not change limits, and in the other three lines about 95 percent did not change their deductibles or retentions on a year-over-year basis.
In this area, Aon said the soft market is expected to continue into 2010 unless there is "a major dislocation of markets, radical reduction in capacity, major terrorism event or natural catastrophe."
Aon added that the carriers in this sector "will continue to focus on acquisition and retention of quality insureds in their challenge to grow net written premium."
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