Third Quarter Market Survey Shows Easing Conditions for USA Coastal Property: CIAB

WASHINGTON — The soft market conditions that have affected most commercial property/casualty lines for more than a year are beginning to spread to coastal properties with wind storm exposures, according to the third quarter 2007 commercial property/casualty market index survey by The Council of Insurance Agents & Brokers.

Commercial agents and brokers responding to the survey said coastal properties with wind exposure are still the hardest risks to insure, but market conditions are beginning to ease, and more capacity is available.

These were among the comments to open-ended questions in the survey, all from brokers based in the Southeast:

  • “Significant wind changes. Most wind accounts are seeing 20-30 percent decreases year-over-year on the same limits.”
  • “Rates are coming down for wind insurance. We thought we might see a change entering hurricane season, however carriers are still quoting aggressively. No significant changes, however, in deductibles.”
  • “Direct writers are now taking coastal exposure with percentage deductibles, along with many other players, with 2 percent to 5 percent wind normal.”
  • “We’re in Florida. The marketplace has gotten very competitive for wind, especially with the smaller regional carriers.”

Overall, the commercial market remains soft for all sizes of accounts, the survey found. Brokers said third quarter renewal rates for the majority of accounts, regardless of size, were significantly lower than during the second quarter, with only a handful of renewal premiums showing no change.

Seventy-four percent of the brokers said premiums for small accounts renewals (with less than $25,000 in commissions and fees) were down from 1-20 percent compared with the second quarter, with an additional 8 percent reporting decreases in the 20-30 percent range. For medium accounts, 75 percent of the brokers reported renewal account premiums were down 1-20 percent, and 17 percent said their renewal premiums were 20-30 percent lower than similar accounts in the second quarter.

Sixty-three percent of brokers said premiums for their large accounts (more than $100,000 in commissions and fees) were 1-20 percent lower than second quarter renewals, with 20 percent reporting premiums down 20-30 percent and 8 percent reporting renewal premiums down 30-40 percent.

An analysis of The Council’s survey responses by Lehman Brothers showed the average premium rate for all sizes of accounts was down 13.3 percent in the third quarter compared with renewals in the second quarter of 2007. The Lehman analysis said large account rates were down an average of 15.9 percent, with medium accounts down 15 percent and premiums for small accounts down an average of 8.9 percent.

The soft market was affecting even commercial lines such as construction risks, medical malpractice and D&O that have experienced rising premiums and tight market conditions in the past. In addition, brokers responding to the survey said more of the business that had moved to the surplus lines market was returning to the standard market, and carriers were aggressively going after new business.

“Breadth of appetite continues to expand,” said a broker from the Midwest. “Companies increasingly are throwing caution to the wind to enter classes of business previously avoided.”

“Right now, there are not as many problems with additional coverages or the placement of risk unless you have a very, very high loss ratio, in a high hazard class,” said a broker from the Northeast.

“Market is very competitive, so carriers are looking for ways to win accounts. Everything is open for discussion,” a broker said.

Click here for full survey results.

About CIAB

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.