Experiencing seven straight years of soft-market conditions, commercial insurers are inching forward with ongoing premium reductions, according to the results of a RIMS Benchmark Survey, which notes that average premiums in every line tracked fell in the first quarter of 2010.
Forecasts for an above-average hurricane season may signal rising premiums on the horizon, however. Colorado State University hurricane forecasters are calling for 15 named storms, eight hurricanes and four major hurricanes in 2010.
“Insurance capacity is abundant throughout the commercial lines market, but the lingering impact of the global recession has reduced the demand for that capacity,” said Dave Bradford, EVP at Advisen, a data analytics company that conducted the survey on behalf of RIMS.
“Abundant capacity, coupled with diminished demand, keeps downward pressure on rates,” Bradford added. “As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims always are a wild card in the pricing cycle.”
As has been the case throughout much of the soft market phase, general liability was the most competitive line during the quarter, with the average premium falling 4.4%. The average property premium, which had been essentially flat over the past several quarters, fell 2.9%. The average workers’ compensation premium was down 2.0%, and average directors and officers liability (D&O) premium was off 1.1%. D&O average premium had been flat to slightly higher throughout 2009 due to rate increases in the financial institution sector, but those increases now have abated.
“Rate levels are down, but insurers nonetheless posted good results in 2009,” said Robert Cartwright, loss prevention manager for Bridgestone Americas Holding Inc. and a member of the RIMS Board of Directors. “As a result, underwriters have not been highly motivated to push for higher premiums. That certainly is good news for risk managers. Forecasters are calling for an active hurricane season this year, though. Large catastrophe losses could cause prices to increase across the board.”
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