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What’s new: In brief (December 20, 2004)


December 20, 2004   by Canadian Underwriter


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The November Consumer Price Index published by Statistics Canada finds auto insurance prices have gone down to a significant degree in total, premiums have dropped by 1.6% since last November alone, to have a “dampening” effect on the CPI. Unfortunately, the decrease in auto premiums was not significant enough to offset increases in gasoline, homeowners’ replacement, fuel oil and cigarette prices. Along with auto rates, computer equipment and traveler accommodation prices also fell year-on-year for the month.

Rating agency Standard & Poor’s has placed Employers Reinsurance Corp. (ERC) and GE Insurance Solutions Corp. on “creditwatch” with negative implications. ERC’s “A+” and GE Insurance’s “A-” ratings are under pressure as a result of concerns about the reinsurer’s reserve strengthening for prior accident years. While S&P expects to decide the status of the companies and their affiliates following release of their yearend results, it says any ratings downgrade will not likely be more than two notches.

Norwich Union is calling on brokers to help stem the tide of soft market pricing and the resulting “boom and bust” insurance cycles. The U.K.’s largest insurer has produced a guide for brokers on emerging risks to help them better understand premium setting, such as obesity, nanotechnology, electro-magnetic fields and cyber terrorism. “Breaking the pattern of constantly fluctuating premiums is in everyone’s best interest intermediaries and their clients, as well as insurers,” says John Seaton, underwriting and pricing director for NU. “Particularly in the commercial arena, chasing the lowest premiums for clients may well gain brokers short-term popularity but unsustainable prices will inevitably lead to over-inflated hikes in the future.”


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