Advisen Report: Weak Economy to Prolong Soft Insurance Market

Weak economic recovery will prolong the soft insurance market, according to new Advisen report

Near-record capacity coupled with lower demand will keep competition strong.

New York (Dec. 13, 2010) – Commercial lines property & casualty insurance companies have seen the pricing gains of the 2001-2003 hard market evaporate, but there are few signs that rates will increase in 2011, according to a new report from Advisen Ltd. In the aftermath of the Great Recession, demand for commercial property & casualty insurance coverage remains depressed, but insurance capacity is abundant. As a result, the soft market that began in 2004 is unlikely to loosen its grip in the near term.

“After six years of falling rates, insurers are saying that they have had enough, that prices must rebound soon,” said Dave Bradford, Advisen executive vice president and the author of the report. “Prices in some lines are now at the lowest point they have been in over a decade, but the market is overcapitalized, and demand is weak. All indicators point to yet lower commercial lines insurance rates in 2011.”

The surplus lines insurance market has been particularly hard hit by falling premiums. In addition to lower prices and decreased demand, business that was written by non-admitted insurers is now being written by admitted carriers looking to bolster sagging top lines.

“Surplus lines written premium is down about 11 percent this year,” said Bradford. “Premium typically flows from non-admitted insurers to admitted insurers during soft markets, so this is not surprising. Most of that premium will find its way back to the non-admitted market when the pricing cycle moves into the hard phase, but times will be lean for surplus lines insurers and brokers until then.”

Barring one or more natural catastrophes or other events that wipe out excess capacity and trigger a sudden turn in the market, Advisen notes that the sharply increasing rates that characterized the 2001-2003 hard market are unlikely once the market turns. The market may bottom out by 2012, but rates are likely to subsequently rise slowly and erratically.

The full 11-page Advisen Special Report, The Insurance Market in 2011: The Lingering Effects of the Recession Fuel Competition, is available at no charge at the Advisen Corner Store,

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