RIMS: Premium Costs Down At Least 18 %

NU Online News Service, July 15, 4:14 p.m.EDT?Insurance premiums declined 18 percent on average andas much as 52 percent for up to half of the second-quarter policyrenewals for directors and officers, liability, property, andgeneral liability, an industry survey has found.[@@]

The Risk and Insurance Management Society Inc. in New Yorkreleased the quarterly results of the RIMS Benchmark Surveyyesterday, a poll of corporate risk managers. The study reportedthat price declines outpaced price gains in every major categoryexcept workers' compensation.

RIMS reported that:

? More than 61 percent of D&O liability insurance renewalswere either less expensive (16 percent lower on average) or flatcompared to last year.

? More than 65 percent of renewals of domestic propertyinsurance were priced lower (18 percent less on average) orflat.

? Fifty percent of all workers' comp renewals were priced higher(14 percent on average) and 43 percent were priced lower (anaverage of 13 percent), with the remaining renewals coming in atthe same level.

"Clearly, when 100 risk managers go into the market and 50 comeback with a significantly better priced deal than the one they hadlast year, that means we are starting to experience a turn in themarket from the past several years of large price increases," saidDaniel H. Kugler, RIMS vice president, membership.

Mr. Kugler said, "The continued decline in D&O pricesaffirms that even the highest flier in the past few years is nowcoming back to earth. We anticipate that the market will continueto soften at least through the end of the year."

Though the momentum toward a soft market continues to build, thestudy found, underwriters still achieved rate increases on asignificant number of renewals.

Average premium prices for the quarter across the entire marketdeclined only slightly or remained flat, creating a potentiallyfalse impression that the overall market was stagnating.

Average D&O premium prices, which had experienced the mostdramatic growth in the heart of the recent hard market, wereessentially flat in the quarter, the survey found.

Property and general liability posted rate decreases, withproperty at -1 percent, down for the third consecutive quarter, andgeneral liability at -2 percent, in the negative column for thesecond quarter in a row.

Workers' comp was the only major line included in the surveythat recorded a discernible increase on average, coming in at onepercent higher, RIMS said. D&O and workers' comp had beenexperiencing significant double-digit increases as recently as lastfall, but both have seen precipitous drop-offs in the rate ofincrease in the last few quarters.

"The bottom has not fallen out of the market, but this is adeliberate march to a soft market," noted David Bradford,editor-in-chief at New York-based Advisen, the information servicesfirm.

Mr. Bradford said, "The mood at the carriers is more down thanthe average price numbers might suggest, but when you figure outthat underwriters are losing decisively in half of allnegotiations, then you begin to understand the real sense of themarket."

Advisen, a provider of information, analytic and benchmarkingtools for commercial insurance professionals, analyzes the surveyresults continuously, offering a dynamic and virtually real-timewindow into the current purchase patterns of commercial insurancebuyers. The results represent data compiled from more than 1100organizations to-date.