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By STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets.

With 2011 worldwide insured property catastrophe losses expected to approach record levels, commercial property rates are expected to increase an average of between 7.5 percent and 12.5 percent, experts say.

Meanwhile, non-catastrophe property rates should remain flat to declining 5 percentage points during the final weeks of the Jan. 1 renewal season. "There is still so much capacity out there for non-catastrophe cover that we are still in a soft market for that business."

Al Tobin, Aon's New York-based national property practice leader, sees the property catastrophe increases still in the single-digit range and non-catastrophe covers in "the flat neighborhood."

In addition to the near record commercial catastrophe losses, carriers also started using RMS 11 -- the risk predicting model issued early last year by California-based Risk Management Solutions -- now that the data has been incorporated into underwriting models.

Finnis said with catastrophe premiums rising, carriers are eager to write more policies. "Unfortunately, RMS 11 on these real large, large deals is putting handcuffs on the carriers, saying that they have to reduce their lines down, or charge more for the capacity," he said.

Tobin said that while some carriers may shy away from increasing business because of the new RMS model, "we have not seen all that big a reduction in supply."

He added that flooding may attract new attention from underwriters with lower sub-limits and higher deductibles on the table to protect carriers from the increased RMS 11 risk, now seen concentrated for the most in Texas and on the Eastern Seaboard.

Once again the U.S. hurricane season rated a "benign" classification with the late August Hurricane Irene making the biggest splash, and that was primarily in the homeowner arena.

"It wasn't really a wind event, but a flooding event, and did not hit large manufacturing and commercial areas," Finnis said. "It really hit only homeowners and small commercial areas and some rural areas."

Reinsurance catastrophe rates rising between 10 percent and 15 percent will also factor into increased primary catastrophe rates, he said.

In other lines, directors' and officers' policy prices continue to decrease this renewal season, although at a less rapid rate than in previous quarters, said Tripp Sheehan, Boston-based U.S. directors' and officers' liability practice leader for Marsh.

Rates declined by an average of 3.4 percentage points compared to 6.5 percentage points at the end of the third quarter. "I am definitely seeing carriers exhibiting much more resolve at holding the line at the primary level than in the past," he said.

With more than 50 markets and many of them yet to suffer serious losses, there is still plenty of capacity to forestall any market hardening in the near future.

In the financial institutions sector, the hardening of pricing since the onset of the financial crisis also has ended with rates now declining by a percentage point or two, Sheehan said.

On the casualty side, workers' compensation rates on average have risen between 2.5 percent and 5 percent this renewal season, with the higher premiums mainly on the West Coast and Northeast.

"Increasing medical-loss ratios have been the main cost factor here, outweighing any pricing benefit from added payroll numbers," said Pamela Ferrandino, New York-based casualty practice leader for Willis North America.

An increase in severity and frequency numbers have led to rate increases of between 5 percent and 10 percent for commercial automobile liability lines.

One positive factor for insureds comes from driving-tracking technologies, such as GPS, have now produced enough data to lead to rate decreases for clients, as they can be linked to better drivers and also help to expedite claims quicker, Ferrandino said.

Finally, umbrella lines are yielding premium increases of between 2 percent and 10 percent, while excess lines have produced only marginal increases.

January 3, 2012

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