Transportation Ins. Market Crowds Even As Prices Fall, Survey Says

"Transportation tends to be a place where excess insurance capacity is allocated. So because it's transitory capacity–it can be utilized to gain premium–it tends to be a place where underwriters will venture when they want to grow their top lines," Richard Augustyn, chief executive officer of NIP Group, told NU.

"When underwriting capacity becomes scarce, they withdraw," leaving only the dedicated transportation underwriters who are it in for all cycles, he continued.

Given these dynamics, he said transportation market conditions "may be correlated with the direction of the overall [commercial] insurance market. It may be a leading indicator."

In that respect, the survey brings bad news from the perspective of insurers about the duration of the soft market. Asked to give their opinions of the overall direction of the transportation market, over three-quarters of the respondents said the market was "soft" or "softer" during second-quarter 2010 (with 16.4 percent saying it was softer and 59.7 percent saying it was soft).

In contrast, during second-quarter 2009, 40 percent of respondents reported "flat" market conditions and

37 percent said the market was "soft."

Compared to last year, the market "is a soft market, and getting softer," Mr. Augustyn confirmed.

While the volatile market continues to soften, however, "it appears that rate reductions are not intensifying" compared to the previous quarter survey, he added.

So there may be "some mixed signals. Rate reductions may have peaked. That is the ray of hope here," he said.

In its reports for various quarters dating back to midyear 2008, NIP graphically reveals the extent of premiums changes indicated by survey respondents for 10 different segments:

o Trucking Operations

o Intermodal Carriers

o Specialized Carriers & Riggers

o Bulk Transportation

o Messenger/Courier Services

o Charter/Tour Bus Operators

o School Bus Contractors

o Limousine Services

o Ambulance and Medical Transport

o Airport Ground Transportation

The survey summarizes overall premium changes, which include rate and exposure changes together, not just price changes, Mr. Augustyn confirmed.

NU's comparison of the latest survey with prior reports reveals that even segments showing the lowest declines in second-quarter 2010, such as charter buses and airport ground transportation, show greater premium drops than for the same quarter a year ago.

For charter buses, for example, 36 percent of respondents reported no change in premiums last year, while the remainder were evenly split (27 percent each) between single-digit increases and decreases. By contrast, in second-quarter 2010, 60 percent reported declines with 15 percent putting them in the double-digit range.

For those looking for hard market tea leaves in the results, however, a comparison to first-quarter 2010 shows more promise. Roughly 70 percent of respondents reported declines in this category, with 47 percent saying there were double-digit declines.

The full second-quarter report also details premiums drops by account size and for auto liability, physical damage, workers' compensation and umbrella business separately.

NU will present more comparative results by segment and more of the interview with Mr. Augustyn and other commercial auto insurance experts in the Sept. 20 edition of the print magazine–including a discussion of the potential future claims impacts of new federal safety measurements (Comprehensive Safety Analysis).