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Soft Market Continues to Chisel Away at Insurance Premiums, According to RIMS Benchmark Survey

Source: RIMS

Posted on 15 Apr 2010

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Now in its seventh year, the soft market shows few signs of loosening its grip on commercial insurance pricing, according to the RIMS Benchmark Survey(TM), administered by Advisen Ltd. Average premiums in every line tracked by the Survey fell in the first quarter. However, forecasts for an above-average hurricane season may signal rising premiums on the horizon.

“Insurance capacity is abundant throughout the commercial lines market, but the lingering impact of the global recession has reduced the demand for that capacity,” said Dave Bradford, Advisen executive vice president. “Abundant capacity coupled with diminished demand keeps downward pressure on rates. As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims always are a wild card in the pricing cycle.”

As has been the case throughout much of the soft market phase, general liability was the most competitive line during the quarter, with the average premium falling 4.4 percent. The average property premium, which had been essentially flat over the past several quarters, fell 2.9 percent. The average workers compensation premium was down 2.0 percent, and average directors and officers liability (D&O) premium was off 1.1 percent. D&O average premium had been flat to slightly higher throughout 2009 due to rate increases in the financial institution sector, but those increases now have abated.

“Rate levels are down, but insurers nonetheless posted good results in 2009,” said Robert Cartwright, loss prevention manager for Bridgestone Americas Holding, Inc. and a member of the RIMS Board of Directors. “As a result, underwriters have not been highly motivated to push for higher premiums. That certainly is good news for risk managers. Forecasters are calling for an active hurricane season this year, though. Large catastrophe losses could cause prices to increase across the board.”

Colorado State University hurricane forecasters are calling for 15 named storms, eight hurricanes and four major hurricanes in 2010.

While risk managers and other commercial insurance buyers are benefitting from lower premiums, insurance brokers are suffering from the double whammy of lower rates and reduced premiums levels resulting from the lingering effects of the recession. Much of brokers’ revenue is tied directly to the volume of premium placed with insurers. Some types of insurance policies calculate premiums based on factors such payroll and revenue, which have fallen substantially as an outcome of the recession. Workers compensation premium volume, which is based principally on payroll, has been particularly hard-hit by the economic downturn. Consequently, many brokers have been forced to streamline operations and reduce headcount to maintain profitability.

About The RIMS Benchmark SurveyTM

RIMS Benchmark Survey™ is produced by Advisen, Ltd., which collects and analyzes the data and provides the technology infrastructure for the survey’s online services. Risk managers and buyers of insurance either contribute directly to RIMS Benchmark Survey™ or by using our “data participation letter” to authorize their broker to provide the client’s program details. The letter is available at or by calling 800-655-6590. Risk management professionals can also contribute by e-mailing current and prior year policy schedules to or by faxing to 212-655-7453.

Risk managers who contribute data to the survey can benchmark the structure of their commercial insurance programs, retained loss costs, exposure demographics and Total Cost of Risk (TCOR) against a highly relevant group of peer companies. Additionally, survey respondents can use software personalized and configured for their needs to view detailed schedules of insurance, programs for current and past years and full-color program tower charts. Both benchmark charts and program charts can be downloaded into any presentation for senior management. The results of the RIMS Benchmark Survey™ are available online or in an annually-published book. Visit for details.