U.S. commercial property and casualty insurance rates were down 4 percent on average last month–the same drop as in March–but an uptick is coming for energy rates thanks to the BP offshore oil spill, an insurance exchange executive predicted.
Although insurance rates in the energy sector were down 2 percent last month, "energy premiums are going to increase, especially for offshore accounts," according to Richard Kerr, chief executive officer of the Dallas-based electronic exchange MarketScout, which produces the monthly "Market Barometer" survey.
"The disaster suffered by British Petroleum in the Gulf of Mexico is huge and will have an immediate impact on all offshore energy placements," he said.
Mr. Kerr remarked that while BP is largely self-insured, "energy underwriters across the globe will participate in this loss via either excess placements, insurance on the non-operators, drilling contractor or blowout prevention manufacturer."
He added that "the non-operators, Anadarko and Matsui Oil, have extensive insurance placements, as does the drilling contractor, Transocean. It may take years to calculate the total insured loss from this disaster, but premiums will increase immediately for offshore energy accounts."
Mr. Kerr observed that "even though onshore insureds may feel they should not suffer because of offshore losses, they, too, could be impacted. Many onshore insurers have some offshore exposure and may try to capture rate increases across the board."
Regarding rates overall for the past month, MarketScout said by coverage class the biggest declines were for general liability (down 6 percent), followed by commercial property (down 4 percent).
A 3 percent decrease was recorded for business interruption, inland marine, umbrella/excess, commercial auto and workers' compensation coverage.
Business-owners policies and professional liability were down 2 percent while a 1 percent decrease was reported for directors and officers liability, employment practices liability, fiduciary, crime and surety.
By account size the biggest drop was for "jumbo" accounts generating over $1 million in premium (down 6 percent), followed by 5 percent for large accounts (from $250,001 to $1 million), 4 percent for medium accounts ($25,001 to $250,000) and 3 percent for small accounts (up to $25,000).
Among industry classes, the largest reductions were in the service sector at 5 percent. Manufacturing and contracting rates were down 4 percent, followed by hatitational, public entity and transportation at 3 percent.
MarketScout said the National Alliance for Insurance Education and Research conducted pricing surveys used in its analysis of market conditions, noting that the surveys help to further corroborate MarketScout's actual findings, which are mathematically driven by new and renewal placements across the United States.
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