July 23, 2007 – WASHINGTON — Commercial property-casualty insurance rates continued their free-fall during the 2nd quarter of 2007 in a marketplace environment described as “totally unpredictable” in terms of pricing and underwriting, according to the latest commercial market index survey by The Council of Insurance Agents & Brokers.
Although brokers and agents handling earthquake insurance in California or wind coverage in the Gulf Coast, Florida and up the Atlantic coast were still experiencing firm market conditions, premiums for the vast majority of commercial accounts of all sizes were down significantly from the 1st quarter 2007.
The Council represents the largest domestic and international commercial insurance agents and brokers who annually place more than 80 percent of the commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts.
Seventy-nine percent of the respondents to the 2nd quarter commercial market survey said premium rates for their small account renewals were down between 1 and 30 percent compared with similar business in the 1st quarter of the year. The largest group (44 percent) reported premium rates down in the 1-10 percent range for small accounts.
Ninety-two percent of the respondents said their medium account premium rates were down between 1 and 30 percent, with 40 percent reporting rate decreases in the 10-20 percent range. For large accounts, 83 percent of respondents said the rates were down from 1 to 30 percent, with the largest group, 40 percent, also in the 10-20 percent range.
A Lehman Brothers analysis of The Council’s market survey data said the average drop in premium rates for all sizes of accounts was 11.8 percent in the 2nd quarter. Small account premium rates were down by an average of 8.3 percent, medium account rates were down by an average of 12.6 percent, and large account rates were down by 14.5 percent in the quarter, according to the Lehman analysis.
The same premium rate trends were evident in most commercial lines, with the exceptions being broker Errors & Omission policies, flood insurance, surety bonds, terrorism and medical malpractice coverage, which were generally holding steady or down slightly.
“Softest market and most relaxed underwriting I’ve seen since the early 1980s,” said a broker from the Southeast.
“Night and day. Totally unpredictable market,” said a broker from the Northeast.
In some cases, the participants reported, carriers were trying to preserve premium by offering lower deductibles, additional coverage and increased limits. Others were aggressively seeking new business, including underwriting with little information on the account and quoting without loss runs.
“Broader appetite for something unusual about the account that might have made it a decline in the past,” said a Midwestern agent. “More willing to max rate credits and overlook loss history.”
Head to California, Florida or the Gulf Coast, and it was a considerably different story.
“Katrina still makes it tough to place property, builder’s risk, etc., in parts of Mississippi,” said one broker.
“Commercial earthquake in California still up over 70 percent from two years ago, although some slight decreases of late,” another reported.
“In New Orleans, it’s every man for himself! We have seen increases from 10 to 400 percent,” a Louisiana broker commented.
“Most carriers are ridiculously conservative considering areas that rarely are affected by wind in coastal areas,” said another.
For full survey results, go to http://www.ciab.com/Q22007marketsurvey
Founded in 1913, The Council is the premier association for commercial insurance and employee benefits intermediaries. The Council represents the leading commercial brokers and agents in the United States and abroad. Council members annually place 80 percent of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts. www.ciab.com.Tags: Council of Insurance Agents & Brokers (CIAB)