Survey shows softening U.S. commercial market

The United States seems to be experiencing the same signs of commercial market softening as is developing in Canada, according to a recent survey by the Washington, D.C.-based Council of Insurance Agents & Brokers (CIAB).
“Commercial property/casualty rates were flat or fell slightly during the first quarter of 2006, with renewal premiums for half of all account sizes holding steady or dropping between 1% and 10% in the first three months of the year,” the CIAB reports on its Web site.
In its survey of the U.S. commercial property and casualty market, the CIAB reports, “15% of the brokers responding said small accounts received premium quotes at renewal that were between 10% and 20% lower than similar quotes received during fourth quarter 2005. And 22% and 24% of the brokers, respectively, said medium and large accounts were down between 10% and 20%t from the previous quarter.”
The council represents the leading commercial insurance agents and brokers in the United States and around the world. Council members write more than 80% of the commercial property and casualty premiums in the United States, and administer billions of dollars in employee benefit accounts.
The council’s Commercial Property/Casualty Market Index Survey is the longest running market survey in the industry, dating back to the fourth quarter 1999.
According to an analysis of the survey data by Lehman Brothers Equity Research, the average commercial property and casualty account renewing in the first quarter of 2006 experienced a rate decline of 2.7%.
The Lehman analysis and broker survey responses to open-ended questions suggest the rate of decline in premium prices is slowing and in some cases, premiums may be stabilizing. The exception is in the coastal regions of the country where both commercial property capacity and wind coverage are problematic.
“Suddenly, after January 1, carriers wanted a flat (rate) or rate increase on renewal,” a surveyed broker from the southwest said. “This was in contrast to the rate reductions we saw prior to year-end. It came with no warning.”
The pattern of stable to slightly reduced premiums on renewal accounts was evident across virtually all commercial property and casualty lines, CIAB notes. “The commercial p/c accounts most likely to experience premium rate increases at renewal, albeit relatively modest increases of between 1% and 10%, were commercial property, commercial auto, business interruption, medical malpractice, terrorism and broker E & O accounts.
“Overall rates are down EXCEPT for property cat exposures (which are) up more than 25%,” said a broker from the Midwest.