Average renewal premiums in three of four lines of business tracked by the RIMS Benchmark Survey™ increased in the third quarter, strongly suggesting that an eight year period of falling commercial insurance rates is at its end.
The RIMS Benchmark Survey™ tracks changes in average program renewal premiums for director & officers liability (D&O), general liability (GL), property and workers’ compensation, as reported by risk managers. The survey is administered by Advisen Ltd.
Of the four lines, only D&O posted a decrease, falling 1.9 percent. The average renewal premium increased 1.2 percent in GL, 1.6 percent in property and 2.1 percent in workers’ compensation.
“Indications have been strong over the past couple of quarters that the market was near bottom, so it’s not surprising to see premiums drifting upward a bit now,” says Dave Bradford, President of Advisen’s Research & Editorial Division and editor-in-chief of the survey. “Sharply higher rates like we saw in 2001 are nowhere in sight, though. The market is still quite competitive.”
Premiums skyrocketed in 2001 and 2002, following a deep and prolonged soft market. The stock market crash of 2000-2002 and massive insured losses from the September 11 terrorist attacks are often cited as catalysts for that hard market.
“Average premiums may be showing modest increases, but it seems pricing generally is still quite favorable in most lines,” says Frederick Savage, FCII, ARM, RIMS Board of Directors. “It would likely take a very large catastrophe or series of catastrophes to trigger a hard market along the line of what we saw a decade ago. Of course, that could happen at any time, but at the moment the insurance market seems to be behaving rationally. Risk managers should budget for somewhat higher insurance costs, but capacity remains abundant, which should help to dampen rate increases.”
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 www.RIMS.org/brokerform or by calling 800-655-6590. Risk management professionals can also contribute by e-mailing current and prior year policy schedules to Benchmark@RIMS.org or by faxing to 212-655-7453.