Commercial lines market softening at an accelerating pace

Commercial lines insurance premiums in 2008 Q1 experienced the largest quarterly drop since 2005, according to the Risk and Insurance Management Society (RIMS) Benchmark Survey.
Undeterred by mounting claims from the meltdown of the subprime mortgage market, the average directors and officers liability (D&O) premium fell 19% in 2008 Q1. It was the largest decrease of all the lines of business tracked by Advisen for the RIMS Benchmark Survey.
Continuing the trend of steady, moderate decrease exhibited over the past two years, general liability premiums fell another 2%, a RIMS release says.
And in a clear indication competition is returning to catastrophe-exposed regions, property premiums fell 6% the largest quarterly decrease since Hurricane Katrina.
“We expected to see the soft market continue into 2008,” said John R. Phelps, member of the RIMS’ board of directors. “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.”
Editor-in-chief of Advisen, David Bradford, commented: “Frankly, we were surprised to see downward momentum building at this pace.”
The downward spiral, he continued, “is an indication of just how overcapitalized the commercial property and casualty insurance industry is. Rapidly deteriorating rate levels will probably wipe out insurer underwriting profits this year, but if there are no major catastrophes, premiums should continue to fall for awhile.”