Towers Perrin Commercial Insurance Pricing Study Reports Smallest Decline in Two Years

Prices Drop 3% in Fourth Quarter; Workers Compensation, Property Among Segments Showing Signs of Stabilizing

STAMFORD, CT, March 16, 2009 – Commercial insurance prices saw a slight decline of 3% during the fourth quarter of 2008 compared to the same quarter a year ago – representing the smallest reduction in the past eight quarters – according to Towers Perrin’s most recent commercial lines insurance pricing and profitability trends survey (CLIPS).

Fourth quarter CLIPS findings indicate that product lines and market segments experiencing the greatest reductions in pricing over the last few years – most notably workers compensation, property and large accounts – may have begun to stabilize.

Further, the pricing reductions in those areas are now generally in line with activity in other commercial lines, with the exception of specialty lines, where, consistent with recent quarters, price changes remained fairly flat.

CLIPS data also show that accident-year 2007 loss ratios deteriorated 7% relative to 2006, and that accident-year 2008 loss ratios rose an additional 12% versus 2007. The deterioration is a continuation of a five-year trend as, overall, prices have eased 11% since 2004, despite ongoing increases in loss inflation.

“The underlying deterioration in underwriting results, coupled with unprecedented investment losses, are contributing to a slowing of pricing declines,” said Jeanne Hollister, Towers Perrin Managing Principal and Property & Casualty Insurance practice leader for the Americas region. “Although the property & casualty industry remains strongly capitalized in the aggregate, we expect that the surplus declines in 2008 will result in increased conservatism in companies’ risk appetite. We believe that this, in turn, will lead to a gradual, general firming of prices throughout the balance of 2009.”


CLIPS data are based on both new and renewal business figures – when available – 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 many of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. CLIPS’ measurement of both pricing changes and loss ratio changes also sets it apart from other studies.

The survey results track the differing trends in pricing across region, line of business, and account size on a quarterly basis. Historically, 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, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia and New Zealand. More information about Towers Perrin is available at

Tags: ,