RIMS Q4 Benchmark Survey indicates soft market losing steam

Commercial insurance rates in the United States are still softening, but at a much slower pace than recent quarters, the Risk and Insurance Management Society (RIMS)’s Benchmark 2008 Q4 Survey found.
The average general liability premium fell more than any other line at 5.9% in 2008 Q4, but this decrease is modest when compared to the 9.6% decline in 2008 Q3, a RIMS release says.
Property premiums were off by 3.8% in 2008 Q4, again a modest decline when compared to the 8.5% decline in 2008 Q3.
D&O continued to show two trends: an increase for financial institutions buying insurance in the face of a meltdown in that sector and falling average premiums for commercial business in other sectors, the release said.
D&O rates fell 1.2% in the 2008 Q4, down from 2.1% in Q3. Excluding financial institution buyers of insurance, the fall in premiums was 4.5% in Q4, as compared with 7.5% in Q3.
“Overcapacity has driven a long soft market and the events of this past quarter may portend a market shift for commercial insurance,” said Dave Bradford, executive vice president at Advisen. “In addition to much-higher-than-average catastrophe losses in 2008, insurance companies are facing claims from the subprime meltdown, global credit crisis and now even from the Madoff scandal. Reserves for these claims and material losses in investment income have led to negative earnings and new capital is scarce,” he added.
The survey results corroborates Advisen’s recent forecast that the commercial insurance premium market cycle is close to its bottom, the RIMS release says.
In its report, Advisen predicted the end of the soft market to occur in 2009 Q4 or 2010 Q1.