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Total cost of risk up 5% in 2012, RIMS benchmark says


July 12, 2013   by Canadian Underwriter


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The average total cost of risk increased by 5% in 2012 over a 1.7% climb in 2011, driven mainly by firming market conditions, according to this year’s RIMS Benchmark Survey.

Total cost of risk up in 2012

The annual survey includes benchmark statistics with industry data for more than 52,000 insurance programs from nearly 1,500 organizations.

In 2012, the TCOR increased from $10.19 per $1,000 of revenue to $10.70 per $1,000 of revenue, the result of hard market conditions, RIMS said.

Property premiums added to average TCOR grew nearly 6%  from $2.92 per $1,000 of revenue to $3.09 per $1,000 of revenue.

A review of umbrella/excess pricing and limit data from Advisen, a partner in producing the survey report, suggested that pricing influences excess insurance program limit buying trends, RIMS noted.

When prices were dropping, insurance buyers tended to increase their limits more, and when prices were increasing, they tended to increase their limits less, the organization said.

“While 2012 experienced a reduction in insured catastrophe losses, insurers continued to implement rate increases through the year,” noted Jim Blinn, executive vice president of Advisen’s Information and Analytics unit and executive editor of the survey.

“Continued pressure on underwriting results and a low interest rate environment motivated underwriting management to seek these higher rates,” he added.

“Rates are rising, but our research shows that improving rates attract new capacity, which makes it difficult to sustain the trend towards progressively higher rates,” added RIMS board director Michael D. Phillipus.

“The wealth of information available in the RIMS Benchmark Survey arms risk practitioners with powerful industry insight that can help shape their understanding of the market and allow them to fulfill their responsibilities with greater confidence and clarity.”  

The 2013 RIMS Benchmark Survey is available for purchase at www.RIMS.org/book.  


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