Fourth Quarter Commercial P/C Rates Continue Decline: CIAB

WASHINGTON, Jan. 23, 2008 – Commercial property/casualty insurance rates continued to decline in the fourth quarter of 2007 for all sizes of accounts although conditions were not dramatically different from the previous quarter, according to the latest commercial market index survey by The Council of Insurance Agents & Brokers.

Coastal property and wind coverage, particularly in Florida, remained the hardest risks to place although even that market was easing, respondents said. Some carriers were reported to be writing “Named Storm” deductibles, which was unheard of in the past few years.

“For our clients that have wind exposures (i.e., coastal), rates are going down and capacity is increasing,” one broker observed. “This is directly attributed to not having hurricanes hit the U.S. during the past two years.”

“While located in the Midwest, we write coverage nationwide. We have seen a return to carriers writing property in wind zones which they were not willing to write last year,” another said.

“Florida wind for builder’s risk has become more available, with rates falling from $1 last year to 50 cents presently,” a broker from the Northeast reported.

For small accounts (those generating less than $25,000 in commissions and fees), 70 percent of the brokers reported that renewal rates were down from 1 to 20 percent, while 13 percent said the renewal rates were unchanged from the third to fourth quarter. For medium accounts (generating $25,000 to $100,000 in commissions and fees), 77 percent of the respondents reported renewal rates down from 1 to 20 percent, with 13 percent reporting drops of between 20 and 30 percent.

Sixty-four percent said their large accounts (generating more than $100,000 in commission and fees) were down 1 to 20 percent, with 15 percent reporting drops in renewal rates from 20 to 30 percent.

An analysis of The Council’s survey results by Lehman Brothers showed the average renewal rate for accounts of all sizes to be down 12 percent. The average rate decline for small accounts was 8.4 percent, and medium and large account rates declined on average 13.8 percent during the fourth quarter.

Respondents to the survey indicated the market experienced no major changes except for an easing of wind deductibles and pricing. That segment of the market had been the exception to the softening conditions affecting other commercial lines.

Although some carriers are maintaining underwriting discipline, most respondents said underwriting standards were less stringent.

“The book has been thrown out the window. Underwriting discipline is gone,” one broker from the Pacific Northwest observed.

“It is 2000-2001 rates all over again, and carriers are writing risks they would not have considered two years ago,” said another commercial p/c agent.

As carriers pushed hard for year-end business, the survey respondents said accounts renewing in the fourth quarter were getting premium quotes between 15 and 30 percent lower than the previous year; premium quotes for some large accounts were 30 to 40 percent less than a year ago, the brokers said.

Click here for the 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.