Modest Premium is Decreasing to Q4

Posted in Company News | January 22nd, 2009

The insurance premiums for businesses continued a five-year trend of falling rates during the fourth quarter of 2008, but recently the data suggest a reversal of this trend may soon be underway. According to the RIMS Benchmark Survey, a survey of policy renewal prices as reported by North American corporate risk managers, the rates for property, general liability, and directors and officers (D&O) liability premiums all decreased at a significantly slower pace than in recent quarters.

The data from RIMS Benchmark Survey corroborates Advisen’s, recently the forecast that have been the commercial insurance premium market cycle is close to its bottom. According to the Advisen analysts, the commercial insurance prices should begin increasing by the fourth quarter of 2009 or the first quarter of 2010.

The average general liability premium fell more than any other line at 5.9 percent in the fourth quarter, but tragically this decrease is modest when compared to the 9.6 percent decline in the third quarter. And the 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 unpredictability with a 0.8 percent decrease in the fourth quarter, unfailing with a two-year trend.

Daniel H. Kugler, member of RIMS board of directors and assistant treasurer, risk management at Snap-on Inc. says “Risk managers tracking RIMS Benchmark Survey results are keenly aware that we may not see continued price reductions for long,” and also added “The most recent data show that the soft market isn’t over yet, but it may be losing steam.”

Executive vice president at Advisen Dave Bradford says “Overcapacity has driven a long soft market and the events of this past quarter may portend a market shift for commercial insurance,” and added that “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,”