Prices in the commercial insurance industry, which declined steadily in 2004 in the first yearlong soft market since 1998, may be showing signs of a rebound, according to a new survey. The information comes from the Risk and Insurance Management Society (RIMS) in New York. The group’s RIMS Benchmark Survey is the industry’s only comprehensive survey of current policy renewal prices as reported by corporate risk managers.
In late 2004, RIMS predicted that underlying economic conditions should ensure that insurance capacity remains at levels that would discourage a pricing freefall. Prices in General Liability and Commercial Property lines appear to be fulfilling those forecasts.
Prices in both lines showed signs of firming during the first quarter of 2005 compared to the decreases experienced over the previous several quarters. Property lines saw prices continue to decline at a rate of 3.5%, but that was in sharp contrast to a nearly 10% decline reported in the fourth quarter of 2004. General Liability actually experienced a slight increase in pricing of 1.1%, potentially presaging a return to a period of rising premiums for that line, says Daniel H. Kugler, RIMS vice president of membership.
“We have consistently predicted that this soft market would probably be short-lived and relatively shallow, especially compared to the extremely deep and prolonged soft market of the 1990s,” Kugler says. “We’ll wait to see if we return to the go-go pricing of the last hard market, which we doubt right now, but for the time being, pricing seems to be showing signs of stabilization.”
Directors and officers (D&O) liability prices seem to offer a microcosm of a market potentially in transition, he says. The initial reports show that prices declined significantly for the first quarter, down 8.1%. But anecdotal indications from the market suggest that larger programs, such as programs for Fortune 500 companies, have seen D&O prices either flatten or even increase.
David Bradford, editor-in-chief at Advisen, the New York survey company that conducted the research for RIMS, says most of the major lines seem to be showing some sign of rebounding. “We have to wonder, however, if this is the bottom, the beginning of the bottom or a brief respite ahead of another round of large decreases,” he says. “We doubt it is the latter. Premiums may go a bit lower yet, but it feels like the market is testing its lower bounds.”
Prices in the commercial insurance industry, which declined steadily in 2004 in the first yearlong soft market since 1998, may be showing signs of a rebound, according to a new survey.
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