P&C Premiums Might Be Bottoming Out

The decline in insurance prices is finally showing signs of hitting bottom, with commercial property and casualty premiums overall dropping an average of 5 percent last month–half the rate of one year ago, MarketScout's “barometer” survey found.

Meanwhile, the directors and officers liability line–hit hard by claims related to the Madoff Ponzi scheme and other losses related to last year's financial meltdown–for the first time in almost three years did not show a downward pricing trend, Dallas-based MarketScout noted. For the month of August, D&O rates were flat, compared to an average decline of 2 percent in July.

“While the overall P&C market is still soft, the market is continuing to moderate with composite rate reductions of minus-5 percent in August 2009 as compared to minus-6 percent in July 2009 and minus-10 percent one year ago,” said Richard Kerr, chief executive officer of MarketScout.

“Insurance buyers purchasing D&O coverage are no longer enjoying premium reductions,” he continued. “Professional liability and small-commercial business are experiencing only very small rate reductions. General liability and workers' compensation decreased the most, with declines of minus-7 percent,” he said.

“It now appears two admitted insurers who traditionally write small-commercial business are tightening their underwriting guidelines and no longer accepting tougher classes of business,” Mr. Kerr noted, while declining to identify the carriers.

“If this more conservative underwriting position holds, we will see some pretty quick rate increases for those small classes of business that must move from admitted to nonadmitted insurers,” he predicted.

After general liability and workers' comp, commercial auto, inland marine and professional liability were the softest lines, with rates falling by an average of 5 percent, MarketScout reported.

These lines were followed by commercial property, business interruption, business-owners policies and umbrella/excess–all down 4 percent. Employment practices liability insurance and surety followed, down 3 percent. Fiduciary and crime rounded out the downward trend, down 2 percent.

By buyer size, small accounts saw rates fall overall by an average of 3 percent, while medium and jumbo accounts came in for the month with a drop of 5 percent, and large accounts saw prices fall 6 percent.