CIAB: Commercial P/C Market Softens More in Second Quarter

July 20, 2005

The commercial property/casualty market continued to soften during the second quarter of 2005, with commercial insurance brokers reporting that insurers are aggressively competing for new business and fighting hard to keep their renewals.

According to the Commercial Property/Casualty Market Index sponsored by The Council of Insurance Agents & Brokers, the vast majority of small, medium and large accounts saw their premium rates drop during the second quarter.

Brokers responding to the survey said 49 percent of the small accounts experienced premium decreases of 1 percent to 10 percent, with an additional 16 percent down 10 percent to 20 percent. For medium and large accounts, the decreases were more dramatic, with 41 percent of medium accounts down 1 percent to 10 percent, and 44 percent down 10 percent to 20 percent, and 34 percent of large accounts down 1 percent to 10 percent, 39 percent down 10 percent to 20 percent and 12 percent down between 20 percent to 30 percent.

An analysis of The Council survey data by Lehman Brothers showed premiums for the average commercial account declined 9.7 percent during the quarter. The average small commercial account experienced a 5.6 percent decrease in rates; the average mid-sized account premium was down 11.4 percent; and the average large account premium decreased by 12 percent.

The same decrease in premium rates was apparent across most lines of commercial insurance during the second quarter, although brokers said they still were experiencing some difficulty with surety bonds as well as director’s and officer’s insurance, medical malpractice coverage and habitational risks such as residential construction.

‘”Do whatever it takes to keep your renewals’ is the message underwriters are getting from management and passing it onto us,” a broker in the Southwest reported. “On business they have an appetite for, they work very hard to keep – reducing the rate, eliminating deductibles, easing loss control issues, etc.”

“Many accounts that had a hard time finding a home have multiple insurers wanting them,” agreed a broker from the Southeast.

Brokers from all regions of the country reported a heightened appetite for new business, and several of the responses suggested that less-than-optimal financial figures from the first quarter could be prompting carriers to go after market share more aggressively.

“With many experiencing anemic first quarter premium growth, competition on price has accelerated,” said a broker in the Northeast.

Several brokers said regional markets are being particularly aggressive, especially on middle market business.

The survey also showed a slight increase in the take-up of terrorism insurance during the second quarter for medium and large accounts although the total number of customers buying the insurance remains relatively small. The brokers responding to the survey said the main reasons their customers do not buy terrorism coverage are the belief they are not likely targets of an attack and the cost of the coverage.

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