Risk managers continue to enjoy favorable insurance prices, but brokers struggle with declining revenues.
NEW YORK (January 13, 2010) — Commercial insurance buyers saw premiums continue to tumble in the fourth quarter, with few signs that that the soft phase of the pricing cycle is near its end, according to the RIMS Benchmark Survey™, administered by Advisen Ltd. The survey tracks changes in insurance policy renewal prices as reported by North American corporate risk managers. Directors and officers liability (D&O), general liability and workers compensation all posted decreases in average premium, while property once again held steady.
“Pricing trends have been remarkably consistent over the past several quarters,” said Dave Bradford, executive vice president of Advisen and editor-in-chief of the survey. “The combination of a weak economy, which has suppressed demand for insurance capacity, combined with a very mild year for natural catastrophes, has kept downward pressure on rate levels. Unless very large catastrophe losses soak up excess capacity, we expect to see this trend continue well into 2010.”
Workers’ compensation and general liability saw the largest decreases, with average declines in renewal premiums of 5.5 percent and 5.0 percent respectively. Average D&O premium fell 2.8 percent, and property was essentially unchanged, falling less than half of a percentage point.
“Some risk managers are reporting higher renewal premiums but, overall, the market continues to be very favorable for insurance buyers,” said Daniel H. Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board of directors and assistant treasurer, risk management, at Snap-on, Inc. “Capacity is abundant in almost every line of insurance. As things now stand, there is little reason to expect commercial insurance prices to increase in the near future. More likely, they will fall yet further.”
While market conditions are benefiting insurance buyers, they are contributing to growing financial stress on agents and brokers that derive much of their income from commissions on insurance premiums. Not only is commission income down because of falling rates, the global recession has cut into insurance premium volume as companies downsize or go out of business. Insurance companies also are suffering from lower premium volume, but the impact is lessened by income from invested assets and by favorable claims experience due to the fact that no major natural catastrophes occurred in the U.S. in 2009. The U.S. property & casualty insurance industry posted a 4.5 percent return on average surplus for the first nine months, rebounding from a negative rate of return in the first quarter, according to the Insurance Information Institute.
About The RIMS Benchmark SurveyTM
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. Risk managers and buyers of insurance either contribute directly to RIMS Benchmark Survey™ or by using our “data participation letter” to authorize 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 can be downloaded 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.
Advisen integrates 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 http://www.advisen.com or call +1.212.897.4800 in New York or +44(0)20.7929.5929 in London.