Soft U.S. commercial market may have finally hit rock bottom: RIMS study

An eight-year soft market in U.S. commercial lines may finally have hit rock bottom, according to The RIMS Benchmark Survey.
Administered by Advisen Ltd., the survey tracks changes in average program renewal premiums for director and officers’ liability (D&O), general liability (GL) property lines and workers’ compensation, as reported by risk managers.
Of the four lines, only D&O posted an average premium decrease in 2011 Q3, falling 1.9%. The average renewal premium increased 1.2% in GL, 1.6% in property and 2.1% in workers’ compensation.
“Indications have been strong over the past couple of quarters that the market was near bottom, so it’s not surprising to see premiums drifting upward a bit now,” says Dave Bradford, president of Advisen’s research and editorial division and editor-in-chief of the survey. “Sharply higher rates like we saw in 2001 are nowhere in sight, though.
“The market is still quite competitive.”
Premiums skyrocketed in 2001 and 2002, following a deep and prolonged soft market. The stock market crash of 2000-2002 and massive insured losses from the Sept. 11 terrorist attacks are often cited as catalysts for that hard market.
“Average premiums may be showing modest increases, but it seems pricing generally is still quite favorable in most lines,” says Frederick Savage, a RIMS board director. “It would likely take a very large catastrophe or series of catastrophes to trigger a hard market along the line of what we saw a decade ago.
“Of course, that could happen at any time, but at the moment the insurance market seems to be behaving rationally. Risk managers should budget for somewhat higher insurance costs, but capacity remains abundant, which should help to dampen rate increases.”