Although 2011 was filled with major global catastrophes, the cost of insurance premiums increased only slightly, according to the "2012 RIMS Benchmark Survey," by RIMS and Advisen Ltd. However, another report found that an increasing number of risk managers are finding the property/casualty market "is tight."
In past years, TCOR -- or the Total Cost of Risk -- has "gone down ... as we have been in a soft market," said Dave Bradford, New York-based president of Advisen's Research and Editorial Division and editor in chief of the annual RIMS survey.
"In 2011, it did go up a little bit and, actually, we expected it to go up a little bit more than it did. It was a fairly small increase [in light of the global catastrophic loss] and almost all of that was being driven by higher property premiums," he said.
The global losses included the earthquake and tsunami in Japan, earthquakes in New Zealand and floods in Australia and Thailand -- making it "the second highest insured loss total ever, according to Swiss Re," the report stated.
The report said that U.S. property/casualty insurers posted $38 billion in catastrophe losses in 2011, of which $33 billion was from U.S. events, mainly tornadoes.
The contribution of property premiums to average TCOR grew nearly 9 percent, from $2.73 per $1,000 of revenue to $2.92 per $1,000 of revenue, the report stated.
According to a midyear 2012 report by Barclays Capital Inc., property/casualty insurance prices are expected to increase 3 percent year-over-year, "driven by deteriorating underwriting results, stabilizing industry capital positions and rising property reinsurance costs."
Roughly three-quarters of respondents are renewing with rate increases, up from two-thirds as of six months ago, according to "U.S. Insurance/Non-Life: Mid-Year 2012 Commercial P&C Insurance Buyers' Survey," for which Barclays surveyed 75 property/casualty insurance buyers.
"In our most recent survey, 23 percent of risk managers said the P&C market is hard (up from only 7 percent six months ago), and none characterized the overall commercial P&C market as soft (vs. 13 percent six months ago)," according to Barclays.
One-third of the survey respondents said the renewal process -- seen as an "indicator of underwriting discipline" -- was more difficult. That was the highest level since 2008, the report stated.
--By Anne Freedman
August 22, 2012
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