Insurance premiums continued to fall in '08, but soft market losing steam

Insurance premiums for employers continued to fall during the fourth quarter of 2008, but recent data suggests a reversal of this trend may be under way.

According to the Risk and Insurance Management Society's RIMS Benchmark Survey, despite a five-year trend of falling rates, property, general liability, and directors' and officers' insurance premiums all decreased at a materially slower pace than in recent quarters. Researchers found that workers' compensation continues to reflect little volatility with a 0.8 percent decrease in the fourth quarter, consistent with a two-year trend.

RIMS officials said data from the survey corroborated with a recent forecast from Advisen, a firm that manages business information and market data for the commercial insurance industry, that the commercial insurance premium market cycle is close to its bottom. Commercial insurance prices should begin increasing by the fourth quarter of 2009 or the first quarter of 2010, according to Advisen analysts.

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Daniel H. Kugler, member of the RIMS board of directors, said individuals who have been tracking the survey results are keenly aware that employers may not see continued price reductions for long.

"The most recent data show that the soft market isn't over yet, but it may be losing steam," he said.

Dave Bradford, executive vice president at Advisen, said overcapacity has driven a long soft market, and the events of this past quarter may portend a market shift for commercial insurance. In addition to higher than average catastrophe losses in 2008, insurance companies are facing claims from the subprime meltdown and global credit crisis, he said.

February 17, 2009

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