Fourth Quarter RIMS Benchmark Survey™ Shows Soft Market Losing Steam
Modest decreases in premium rates; Global economic crisis increasing pressure on insurers to raise rates
Insurance premiums for businesses continued a five-year trend of falling rates during the fourth quarter of 2008, but recent data suggest a reversal of this trend may soon be underway. Rates for property, general liability, and directors’ and officers’ (D&O) insurance premiums all decreased at a materially slower pace than in recent quarters, according to RIMS Benchmark Survey™, the industry’s leading survey of policy renewal prices as reported by North American corporate risk managers.
Data from RIMS Benchmark Survey™ corroborates Advisen’s recent forecast that the commercial insurance premium market cycle is close to its bottom. Commercial insurance prices should begin increasing by the fourth quarter of 2009 or the first quarter of 2010, according to Advisen analysts.
The average general liability premium fell more than any other line at 5.9 percent in the fourth quarter, but this decrease is modest when compared to the 9.6 percent decline in the third quarter. Property premiums were off by 3.8 percent, again modest when compared to the 8.5 percent decline in the third quarter. Workers’ compensation continues to reflect little volatility with a 0.8 percent decrease in the fourth quarter, consistent with a two-year trend.
Unsurprisingly D&O continued to show two trends: an increase for financial institutions buying insurance in the face of a meltdown in that sector and falling average premiums for commercial business in other sectors. D&O rates fell 1.2 percent in the fourth quarter, down from 2.1 percent in the third quarter. Excluding financial institution buyers of insurance, the fall in premiums was 4.5 percent in the fourth quarter, as compared with 7.5 percent in the third quarter.