The recession may be over, but recovery is not happening quickly enough for insurers and brokers. From unemployment rates hovering at about 10 percent to still rising business bankruptcies, the lingering effects of the recession continue to whittle away at commercial lines insurance revenue. According to a new Advisen Ltd. Special Report sponsored by FM Global, capacity for insurance is abundant in most lines, but demand for that capacity has been diminished by the ravages of the recession.
“Decreased demand as a result of the damaged economy will keep rates from rising in 2010,” said Dave Bradford, an Advisen executive vice president and author of the briefing. “In addition premium volume for lines of business that are based on factors such as payroll and revenues will continue to be suppressed by the lingering impact of the recession. It is going to be a challenging year for insurers and, especially, brokers.”
As premium volume falls, insurance companies consider new avenues for growth. “Insurers are looking for new areas to deploy their excess capacity,” explained Bradford. “The continuing soft market further encourages insurers to introduce new products and move into new markets. New products and markets can provide new revenue streams, but they can also cause erratic insurer results.”
Brokers continue to take a hit from depressed written premiums. Decreased brokerage income has forced many brokers to streamline operations and reduce headcount. According to Bradford, “Financial pressure is likely to fuel more consolidation in the brokerage sector as stronger companies scoop up struggling companies at bargain prices.”
Advisen’s Special Report, “The Insurance Market in 2010: The Lingering Impact of the Recession on Capacity and Pricing,” sponsored by FM Global, examines the forces driving the insurance pricing cycle, and the influence of the recession’s aftermath on premiums. It also outlines the conditions that eventually will spark the inevitable hard market.
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