2008 is shaping up to be a good year for insurance buyers.
That's the word from John R. Phelps, a member of the board of directors for the Risk and Insurance Management Society (RIMS) and director of business risk solutions for Blue Cross and Blue Shield of Florida, Inc.
RIMS recently released its Benchmark Survey, which showed that during the first quarter of 2008, commercial lines insurance premiums experienced the largest quarterly drop since 2005. The survey tracks policy renewal prices as reported by corporate risk managers.
"We expected to see the soft market continue into 2008," Phelps said. "Not only are soft market conditions ongoing, they appear to be accelerating, due in no small part to the excellent combined ratios for key markets. This bodes well for insurance buyers this year."
According to the survey, the average directors and officers liability (D&O) premium fell 19 percent in the first quarter, the largest decrease of all the lines of business tracked in the survey. This decrease occurred despite mounting claims from the subprime mortgage market disaster.
The survey also showed that: - General liability premiums fell another two percent, continuing the trend of steady, moderate decreases seen during the past two years.
- Workers compensation price decreases continued during the first quarter, falling 11 percent.
- Property premiums fell 6 percent, the largest quarterly decrease since Hurricane Katrina. RIMS believes this clearly indicates competition is returning to catastrophe-exposed regions.
David Bradford, editor-in-chief of Advisen, which conducted the survey for RIMS, said they were surprised to see downward momentum building at this pace.
"It is an indication of just how overcapitalized the commercial property/casualty insurance industry is," Bradford said. "Rapidly deteriorating rate levels will probably wipe out insurer underwriting profits this year, but if there are no major catastrophes, premiums should still continue to fall for a while."
Bruce Lidstrom, general manager of NAMIC Insurance Agency, said his company expected premiums to drop a bit, due to the soft market.
"Companies have experienced good underwriting results, which not only keeps prices down but brings new players into the market," Lidstrom said. "Because many of our members are smaller insurance companies, I don't think we will see the type of price decreases that apply to very large commercial insurance writers, but we will see some downward trend in pricing." |
