Council of Insurance Agents & Brokers: Market Softening Continues in All But Cat-Prone Areas

Commercial insurance premiums continued their decline in all but catastrophe-exposed areas during the fourth quarter of 2006, with insurers willing to lower prices and place fewer restrictions on coverage to get new business, according to the latest market survey by The Council of Insurance Agents & Brokers. “There is no underwriting,” a broker from the Midwest responded when asked for general market observations.

Although most agents and brokers did not go that far in describing the market, they did report a definite softening, with insurers offering better and broader terms and lower deductibles for almost all classes of commercial p/c coverage. “Insureds are getting more for their money,” said an agent from the Southwest.

As has been the case since the fall of 2005, the exception to the general market trend was coastal property, particularly Florida accounts, where wind coverage capacity remained scarce and costly. Earthquake and other coverages for cat-exposed property also were expensive and hard to find, respondents said.

An analysis of The Council’s survey data by Lehman brothers showed an average rate decline of 9.6 percent for commercial p/c accounts of all sizes during fourth quarter 2006. With an average decline of 12.1 percent for large accounts and 6.3 percent for small accounts, both of those categories hit their lowest rate of decline point since The Council surveys began in 1999, Lehman’s analysis showed.

Mid-sized accounts reached their low point during the second quarter 2005. The highest premium increases came during the fourth quarter of 2001, right after the 9/11 terrorist attacks. Eighty-six percent of brokers responding to the survey said premiums for their small accounts held steady or declined during the fourth quarter 2006 compared with the previous quarter; and the majority — 48 percent — reported a drop of 1 to 10 percent. For medium and large accounts, the brokers said more than 80 percent of their account renewals experienced premiums drops of 1 to 20 percent. In addition to the general market softening in virtually all classes of commercial property/casualty accounts, it appeared that the standard markets are making room for some accounts that previously were handled as surplus lines.

“Risks are beginning to come out of the surplus lines markets and back into the standard market. We haven’t seen this since 9/11,” said a broker from the Southwest. Even medical malpractice premiums were starting to stabilize, according to the survey respondents, and some carriers are not always requesting loss runs in order to quote new business. “Renewing carriers are still trying to keep premiums level or higher. However, the marketplace is demanding pricing to be lower to avoid losing new business to carriers who come in quite a bit lower — sometimes as much as 40 percent lower depending on the desirability of the account,” a broker from the Southeast said.

“Less restrictive ‘Tell me what you need’ is the story on most p/c clients,” said an agent from the Northeast. The regional carriers are being particularly aggressive, brokers from the Midwest said. Although wind coverage is still hard to find and expensive for coastal property, be it in Florida or Cape Cod, some of the respondents indicated the worst may be over. “Coastal wind remains difficult, but there are some rays of light. A few carriers are coming in and under-cutting the market with ‘lower’ premiums than the rest of the marketplace,” reported one broker. “Flat to small decreases on coastal,” agreed another broker. “Increases seem to have peaked.” * For the full survey results, please go to 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 write 80 percent of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts.
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