The Council’s Survey Shows USA Soft Market Even Softer in First Quarter 2008

WASHINGTON – The soft cycle for commercial property/casualty insurance got even softer in the first quarter of 2008, according to the latest Commercial Market Index Survey by The Council of Insurance Agents & Brokers, with three-fourths of the agents and brokers reporting that renewal premiums for their small and medium accounts were down 1-20 percent compared with fourth quarter 2007.

Renewal premiums for large commercial accounts, those generating more than $100,000 in commissions and fees, faced an even steeper decline. Six in 10 brokers reported renewal premiums for their largest accounts were down 1-20 percent, and 24 percent of the brokers said those accounts were down 20-30 percent compared with the previous quarter.

An analysis of The Council’s survey data by Lehman Brothers showed the average premium decline for all commercial accounts regardless of size was 13.5 percent during the first quarter 2008. The average premium for small accounts was down 10 percent, for medium accounts down 14.7 percent and for large accounts down 15.7 percent, according to the Lehman data.

The same declines were mirrored in the various commercial lines included in the survey. About one-third of the brokers reported no change in renewal premiums for flood insurance, surety bonds and terrorism insurance, the vast majority said rates were down 1-20 percent for virtually every other commercial line. Twenty-two percent of the brokers and agents reported that their commercial property accounts were renewing at 20-30 percent lower than fourth quarter 2007.

Brokers and agents responding to open-ended questions about market conditions reported that price competition was dominating the market, with looser underwriting standards and more options regarding coverage and deductibles common as carriers seek to retain the business they have and bring in new customers.

“Some carriers are now throwing loss runs out the window, and some are developing appetite for risks they have not written before. It’s a ‘whatever it takes to write’ mentality for many carriers right now,” said a broker from the Southeast.

“I had a market take an account with a new $800,000 loss, and they still took it. It’s a bit scary,” a Midwest broker reported.

Here are some other observations from brokers around the country:

  • “(Carriers) will quote with less information and will quote quickly. Carriers are hungry for new business and eager to lock in renewals early with favorable terms.”
  • “Much more flexibility with carriers in terms of expansion of classes they want to write.
  • “It is all about price.”
  • “We continue to see accounts previously written by surplus lines carriers now being written by standard markets.”

Although coverage for coastal properties was still problematic, there was more capacity available and rates were down in most areas. Even in the hard-to-write Florida market, brokers reported wind coverage was more easily obtainable, either in the voluntary marketplace or from the state insurer of last resort, Citizens.

Click here for the full survey results.

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.