Data from RIMS Benchmark Survey™ corroborates Advisen's recent forecast that the commercial insurance premium market cycle is close to its bottom. Commercial insurance prices should begin increasing by the fourth quarter of 2009 or the first quarter of 2010, according to Advisen analysts.
The average general liability premium fell more than any other line at 5.9 percent in the fourth quarter, but this decrease is modest when compared to the 9.6 percent decline in the third quarter. Property premiums were off by 3.8 percent, again modest when compared to the 8.5 percent decline in the third quarter. Workers' compensation continues to reflect little volatility with a 0.8 percent decrease in the fourth quarter, consistent with a two-year trend.
Unsurprisingly D&O continued to show two trends: an increase for financial institutions buying insurance in the face of a meltdown in that sector and falling average premiums for commercial business in other sectors. D&O rates fell 1.2 percent in the fourth quarter, down from 2.1 percent in the third quarter. Excluding financial institution buyers of insurance, the fall in premiums was 4.5 percent in the fourth quarter, as compared with 7.5 percent in the third quarter.
"Risk managers tracking RIMS Benchmark Survey™ results are keenly aware that we may not see continued price reductions for long," says Daniel H. Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board of directors and assistant treasurer, risk management at Snap-on, Inc. "The most recent data show that the soft market isn't over yet, but it may be losing steam."
"Overcapacity has driven a long soft market and the events of this past quarter may portend a market shift for commercial insurance," says Dave Bradford, executive vice president at Advisen. "In addition to much higher than average catastrophe losses in 2008, insurance companies are facing claims from the subprime meltdown, global credit crisis and now even from the Madoff scandal. Reserves for these claims and material losses in investment income have led to negative earnings and new capital is scarce," continues Bradford. "We expect the next few quarters of data from the RIMS Benchmark Survey™ to show the end of the soft market."
About The RIMS Benchmark Survey™
The RIMS Benchmark Survey™ is produced by Advisen, Ltd., which collects and analyzes the data and provides the technology infrastructure for the survey's online services. Advisen introduced the Data Participation Letter that enables risk managers and buyers of insurance to contribute to the RIMS Benchmark Survey™ by designating their broker to provide the client's program details. The letter is available at www.RIMS.org/brokerform or by calling 800-655-6590. Risk management professionals can also contribute by e-mailing current and prior year policy schedules to Benchmark@RIMS.org or by faxing to 212-655-7453.
Risk managers who contribute data to the survey can benchmark the structure of their commercial insurance programs, retained loss costs, exposure demographics and Total Cost of Risk (TCOR) against a highly-relevant group of peer companies. Additionally, survey respondents can use software personalized and configured for their needs to view detailed schedules of insurance, programs for current and past years and full-color program tower charts. Both benchmark charts and program charts download into any presentation for senior management. The results of the RIMS Benchmark Survey™ are available online or in an annually-published book. Visit www.RIMS.org/benchmark for details.
About Advisen Ltd.
Advisen manages business information and market data for the commercial insurance industry and maintains critical risk analytics and time-saving workflow tools for over 530 industry leading firms. Through its work for the broadest customer base among information service providers, Advisen delivers actionable information and risk models at a fraction of the cost to have them built internally. Designed and evolved by risk and insurance experts, and used daily by more than 100,000 professionals, Advisen combines the industry's deepest data sets with proprietary analytics and offers insight into risk and insurance that is not available on any other system. Advisen is headquartered in New York. For more information, visit www.advisen.com or call +1.212.897.4800 in New York or +44(0)20.7929.5929 in London.