Towers Perrin Commercial Insurance Pricing Study Reports Continuing Modest Price Increases in Third Quarter of 2008

STAMFORD, CT, December 17, 2008 – Commercial insurance prices dropped 4% during the third quarter of 2008 compared to the same quarter a year ago, according to Tower Perrin’s most recent commercial lines insurance pricing and profitability trends (CLIPS) survey.

This deterioration, while less severe than the 5% drop seen in the second quarter of 2008, comes at the front end of the decline in the financial markets, and the full effect of the current global economic downturn on commercial prices has not yet been captured. Property pricing softened considerably, while price changes in specialty lines remained fairly flat for the second consecutive quarter, according to the survey.

Updated loss ratio indications from the survey show accident year 2007 loss ratios deteriorating 11% relative to 2006, and the partial indication for accident year 2008 shows a 10% decline.

“The overall deterioration in pricing is a continuation of the trend cited when we published our first survey almost four years ago,” said Jeanne Hollister, Towers Perrin managing principal and Property/Casualty Insurance practice leader for the Americas region. “We do, however, expect to see abatement in soft market conditions in the U.S., as companies consider a number of factors in their pricing decisions, including equity and credit-related losses to asset portfolios, a continuation of poor underwriting results in many sectors, heavy weather-related losses and a forecasted spike in directors and officers liability claims.”

“In our view, the industry is fast approaching a point where the underwriting results are no longer favorable relative to economic hurdle rates, and that generally signals a ‘tipping point’ in terms of companies’ pricing actions,” added Ms. Hollister.


CLIPS data are based on both new and renewal business obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.

CLIPS participants represent a cross section of U.S. property/casualty insurers that include the majority of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. CLIP’ measurement of both pricing changes and loss ratio changes also sets it apart from other studies.

The survey results highlight the differing trends in specialty accounts and property pricing over the last several quarters, and price level and loss ratio change results vary considerably by line of business and market segment.

About Towers Perrin

Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, reinsurance intermediary services and actuarial consulting. The firm also provides retail brokerage services. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia and New Zealand. More information is available at

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