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Total cost of risk in North America about 1% less in 2014 compared to 2013: 2015 RIMS Benchmark Survey


July 29, 2015   by Canadian Underwriter


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In a relatively stable insurance market, businesses paid nearly 1% (.99%) less in 2014 than they did in 2013 to cover the total cost of risk (TCOR) after three consecutive years of increases, according to the 2015 RIMS Benchmark Survey.

Risk management administration costs dropped 5% as costs for both outside services and risk management departments declined

Released on Wednesday, the survey – produced by RIMS, the Risk Management Society, and Advisen Ltd., a commercial insurance and risk professional information provider – provides the risk management and insurance industry with TCOR statistics from more than 52,000 insurance programs and almost 1,500 organizations. TCOR is the cost of insurance, plus the costs of the losses that are retained, and the administrative costs of the risk management department.

The annual survey tracks changes in insurance policy renewal prices as reported by North American corporate risk managers.

Besides finding that the average TCOR fell 1% from $10.90 per $1,000 of revenue in 2013 to $10.80 in 2014, the survey also found that management liability, workers compensation, liability and property costs declined. In addition, risk management administration costs dropped 5% as costs for both outside services and risk management departments declined, RIMS said in a press release.

“The 2014 survey results reflect the overall stability of the U.S. property/casualty market,” said Jim Blinn, executive vice president and global product manager at Advisen, in the press release. “One notable driver is the increasing role of alternative capital in assisting reinsurers to deal with economic uncertainties. A related factor is the rising importance of predictive models among insurers, not only in the area of property, but also for cyber and casualty.”

Commenting on what the industry expects in the second half of 2015, Blinn said commercial property/casualty insurers are beginning to see a softening market. “We are looking at a period of rate decreases in insurance premiums owing to rising competition in the market and more than enough available capacity,” he said.

The survey’s executive summary notes that risk managers and underwriters are on the lookout for existing and emerging trends that may impact their businesses, with climate change “shaping up to be one of the decade’s defining issues. It continues to be a cause of concern among companies and organizations as evidence linking it to flood and other natural disasters continue to mount,” the executive summary noted, adding that “already, regulators such as the U.S. Environmental Protection Agency (EPA) are sounding the alarm for the high economic cost of climate change.”

Other issues of concern, according to the survey, include: terrorism and potential losses from cyberattacks, solar storms, fracking, construction and others. “As always, all eyes are also on catastrophe losses which are considered wild cards in the pricing cycle,” the executive summary stated. “However, with the industry well-capitalized, insurers are able to handle more risk than a few years ago.”


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