There is reportedly relief in sight for commercial insurance buyers numb from years of hefty premium increases and stiff underwriting conditions.
The commercial middle market will enjoy lower rate increases and some flat pricing over the next six months, according to a new survey released by Assurex Global. The commercial middle market is defined by risks with premiums between $25,000 and $100,000.
The survey, conducted among Assurex Global’s independent Partners, reveals that the commercial middle market is slowly beginning to stabilize, as underwriters take a more aggressive approach to new business and renewals.
“That’s good news for executives and business owners who are tired of double-digit premium increases,” said Greg Collins, Assurex Global chairman and president of Parker, Smith & Feek of Bellevue, Washington. Collins noted that in particularly hard-hit industries like construction, insurance premiums have increased three to four times over the past few years.
Unfortunately, the higher deductibles to which business has become accustomed are reportedly likely to remain in place over the next six months. Six in 10 Assurex Global Partners report deductibles have gone up in the last six months, as clients use deductibles to offset higher premiums.
In the United States as in the rest of the world, the commercial insurance marketplace has been unsettled for several years, as stock markets tumbled, carrier reserves weakened, environmental issues worsened, and claims from the Sept. 11 terrorist attacks mounted. As underwriting capacity fled certain lines of business, some carriers were forced out of business altogether.
Internationally, the Assurex Global survey reveals that Europe and the Middle East are experiencing some rate relief, mixed with the perception that insurers are taking advantage of the current environment. Latin America is experiencing general market stability with pockets of capacity and solvency ills. African rates are still firming as clients look to higher deductibles. In Asia and the Pacific Rim, premiums are up, limits are down, coverage is restricted, and capacity is tight, especially in Japan.
Key Survey Findings:
Overall, the Assurex Global Survey paints a picture of an industry in transition. Carriers, now looking at accounts they passed up 12 months ago, are reportedly showing more willingness to negotiate pricing and terms. While not as hard as it has been for the past few years, the market certainly cannot be called soft.
As an indication that property insurance capacity is returning and prices softening, 55 percent of Assurex Global Partners anticipate premium increases will not exceed 10 percent for the next six months. Another 13 percent expect decreases of as much as 25 percent. About 28 percent see increases of 10 percent – 25 percent.
Construction has been particularly challenged, with many insurance underwriters abandoning buyers. As a result, construction clients now work with their brokers to manage property insurance expenses creatively through alternative risk transfer, self-insured retentions, and higher deductibles.
The news is not as promising for directors and officers (D&O) coverage, particularly for the healthcare, technology and energy markets. Premium increases are expected to continue as they have for the past six months. Deductibles remain higher and limits lower, with buyers assuming higher deductibles to manage cost. One-third of Assurex Global Partners expect D&O premiums to increase more than 25 percent over the next six months. Another 44 percent anticipate increases of 10 percent – 25 percent.
“D&O insurers have been rocked by the corporate governance scandals and stock market uncertainty of the past few years,” said Collins. As a result, some carriers have exited the D&O business, and others remain skeptical about underwriting.
Professional liability continues to be problematic. Seven of 10 Assurex Global Partners expect professional liability premiums to increase by at least 10 percent – 25 percent on the heels of similar increases in the last six months.
Fully 64 percent of Assurex Global Partners expect liability premiums to increase by 10 percent – 25 percent in the next six months, mirroring increases in the first half of 2003.
What Do These Findings Mean to Your Business?
Premium and deductible relief will vary, depending upon your business and industry risks, your environmental and regulatory needs, and your insurance broker’s industry clout and relationship with underwriters.
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