“Few signs” that commercial premiums will increase sharply in short term: RIMS survey

Amid an unprecedented economic crisis in the United States, insurance premiums for businesses continued to slide towards a “soft landing” rather than spike upwards in the form of rate increases, according to the 2009 First Quarter RIMS benchmark Survey.
“While banks and other financial institutions bought directors and officers (D&O) insurance at substantially higher rates, the rest of the commercial insurance market in the first three months of 2009 saw a continuing trend of little or no change in rates,” according to the survey.
General liability premiums fell 3.8% for policies renewing during 2009 Q1, compared to a 5.9% decline in 2008 Q4.
The average property renewal was flat in 2009 Q1 compared to a decline of 3.8% percent in 2008 Q4.
However, there was a wide range of changes in recent renewal premiums for individual property risks: premium changes ranged from a decrease of 11% to an increase of 14%.
“The D&O market continued to be split between financial institution (FI) risks and all other (commercial) risks,” the benchmark survey noted. “Overall, the average D&O premium increased by 3%, but the increase was driven entirely by financial companies.
“Excluding FI firms, the average renewal was down 3%. Higher FI premiums are the outcome of massive losses from the meltdown of the subprime mortgage market and the ensuing credit crisis.
“By comparison, overall D&O rates fell 1.2% in the fourth quarter of 2008 and fell 4.5% during that period, excluding FI firms.”
“Most risk managers continue to see flat or slightly lower premiums at renewal,” says Daniel H. Kugler, a member of the RIMS board of directors and assistant treasurer of risk management at Snap-on Inc. “The insurance market is still very competitive and, while some insurers are predicting an imminent hard market, there are few signs that rates will rise sharply anytime in the near future.”