Steady erosion of commercial insurance industry pricing continued during the third quarter of 2007, according to the RIMS Benchmark Survey, a survey of current policy renewal prices as reported by corporate risk managers.
As has been the case in recent quarters, only property insurance showed an increase in the average renewal premium, which was driven substantially by companies in earthquake-exposed regions. Average property premiums rose 2.1 percent in the third quarter of 2007.
Once again, directors and officers liability (D&O) posted the largest decrease at 3.9 percent, while average general liability premiums decreased by 3.2 percent.
Workers’ compensation averages, while still falling, are decreasing at a slower rate; they experienced a drop of 1.5 percent during the third quarter, due most likely to the impact of reform measures in several large states, according to an Advisen analysis. These reform measures had previously driven premiums sharply lower but have now worked their way through the system.
“For the most part, pricing trends continue to be very positive for commercial buyers,” says John R. Phelps, member of RIMS Board of Directors and director of business risk solutions for Blue Cross and Blue Shield of Florida, Inc. “All indicators point to further improvements in the fourth quarter, barring a major catastrophe.”
“The soft market is driven by rapidly increasing policyholders’ surplus, which equates to insurance capacity,” says David Bradford, editor-in-chief of Advisen. “Underwriting profits and strong investment returns continue to add to surplus, which suggest that this soft market has a long way to go before it reaches bottom.”
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