Commercial buyers report pricing rebound

Commercial insurance buyers in the U.S. and Canada are reporting pricing rebounds and stabilization in the first quarter of 2005, according to benchmark survey results published by the Risk & Insurance Management Society (RIMS) and Advisen.
While 2004 represented a year-long period of rate softening, rate declines fell off in many lines in early 2005, while other accounts stabilized, risk managers report. Predictions were for a short and shallow soft market, unlike that seen in the 1990s, notes RIMS vice president of membership, Daniel Kugler.
In the last quarterly survey, RIMS and Advisen had pointed to several economic factors forcing insurers to maintain adequate pricing, including persistently low interest rates and increased shareholder scrutiny, as well as the cost of increased regulation.
In general liability pricing rose 1.1% in the first quarter, while commercial property dropped 3.5%, well off the nearly 10% drop seen in late 2004.
Directors’ and officers’ liability did decline significantly, down 8.1% in the first quarter, but this appears to reflect the experience of small and mid-size companies, rather than Fortune 500 organizations where rates were flat or even up.
“Most of the major lines seem to be showing some sign of rebounding; with property and general liability, the trend is quantified and with D&O, it is anecdotal, but we are certainly experiencing some stabilization,” says David Bradford, editor-in-chief at Advisen. “We have to wonder, however, if this is the bottom, the beginning of the bottom or a brief respite ahead of another round of large decreases. We doubt it is the latter. Premiums may go a bit lower yet, but it feels like the market is testing its lower bounds.”