No end in sight for soft commercial insurance market, researchers say
Premiums in the commercial insurance market continued to tumble in the fourth quarter of 2009, with few signs that the soft phase of the pricing cycle is near its end, according to a recent survey.
The Risk and Insurance Management Society's annual RIMS Benchmark Survey, administered by Advisen, tracks changes in insurance policy renewal prices as reported by North American corporate risk managers. Researchers found that workers' compensation and general liability saw the largest decreases with average declines in renewal premiums of 5.5 percent and 5 percent respectively. Directors and officers liability premium fell 2.8 percent while property remained essentially unchanged.
"Pricing trends have been remarkably consistent over the past several quarters," said Dave Bradford, executive vice president of Advisen and editor-in-chief of the survey. "The combination of a weak economy, which has suppressed demand for insurance capacity, combined with a very mild year for natural catastrophes, has kept downward pressure on rate levels. Unless very large catastrophe losses soak up excess capacity, we expect to see this trend continue well into 2010."
While market conditions are benefiting insurance buyers, the survey found that they are contributing to growing financial stress on agents and brokers that derive much of their income from commissions on insurance premiums. Researchers said that not only is commission income down because of falling rates, the global recession has cut into insurance premium volume as companies downsize or go out of business. Insurance companies also are suffering, the study found, from lower premium volume. However, researchers noted that the impact is lessened by income from invested assets and by favorable claims experience due to the fact that no major natural catastrophes occurred in the U.S. in 2009.
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January 25, 2010
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