Total Cost of Risk Drops for 3rd Year: RIMS Benchmark

Despite rising uncertainty and increasingly more complex risk profiles, businesses saw a decline in the total cost of risk (TCOR) for the third year in a row, according to the 2017 RIMS Benchmark Survey.

The Benchmark Survey, produced with Advisen, defines TCOR as the cost of insurance, plus the costs of the losses that are retained and the administrative costs of the risk management department.

Key findings from this year’s RIMS Benchmark Survey:

• Technological advances have caused a “seismic shift in the risk landscape, creating new types of claims and forcing insurers to consider new products and solutions for customers.”
• Insurers ended 2016 with average capital and surplus at its highest level in 10 years. However, excess capacity is undermining profitability, as seen by falling net income and return on average equity.
• The personal insurance space is in the midst of a consumer-centric revolution, offering customers new transaction platforms, better metrics and more flexible pricing and coverage options. Commercial insurance is expected to adopt a similar focus, transforming the way business is transacted.
• Predicted rate increases for cyber, errors and omissions (E&O) and workers’ compensation failed to materialize across the board. Projections for 2017 are more moderate, with property and most liability lines flat to down 10 percent.
• Emerging trends in the 2017 risk landscape include the tech revolution, security issues, natural catastrophes and political upheaval.

The annual RIMS survey, produced with Advisen Ltd., is a single source of benchmark statistics with industry data for more than 20,000 insurance policies from 759 organizations, 553 of whom contributed data in 2016. These insurance programs represent over $4 billion in premium. It tracks changes in insurance policy renewal prices, retained loss costs and administrative costs as reported by North American corporate risk managers. Advisen compiles policy information within 10 insurance coverage lines and reports on 14 distinct industry groups, in addition to aggregating a summary of all responses.

Source: RIMS