Survey: 1Q Commercial Lines Premiums Drop Most Since 2005

April 7, 2008

Commercial lines insurance premiums experienced the largest quarterly drop since 2005 during the first quarter of 2008, according to an industry survey of risk managers.

Undeterred by mounting claims from the meltdown of the subprime mortgage market, the average directors and officers liability (D&O) premium fell 19 percent in the first quarter, the largest decrease of all the lines of business tracked by Advisen for the RIMS Benchmark Survey, a survey of policy renewal prices as reported by corporate risk managers.

Continuing the trend of steady, moderate decreases exhibited over the past two years, general liability premiums fell another 2 percent.

After demonstrating a moderating trend over the course of 2007, workers’ compensation price decreases surged during the first quarter, falling 11 percent.

In a clear indication that competition is returning to catastrophe-exposed regions, property premiums fell 6 percent — the largest quarterly decrease since Hurricane Katrina.

“We expected to see the soft market continue into 2008,” says John R. Phelps, ARM, CPCU, member of RIMS Board of Directors and director of business risk solutions for Blue Cross and Blue Shield of Florida Inc. “Not only are soft market conditions on-going, they appear to be accelerating, due in no small part to the excellent combined ratios for key markets. This bodes well for insurance buyers this year.”

“Frankly, we were surprised to see downward momentum building at this pace,” says David Bradford, editor-in-chief of Advisen. “It is an indication of just how overcapitalized the commercial property and casualty insurance industry is. Rapidly deteriorating rate levels will probably wipe out insurer underwriting profits this year, but if there are no major catastrophes, premiums should still continue to fall for a while.”

Source: RIMS, www.RIMS.org
Advisen, www.advisen.com

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