Commercial rates continue to climb: U.S. brokers

A majority of commercial accounts saw premium increases during the fourth quarter of 2002, according to U.S. brokers. In the Council of Insurance Agents and Brokers (CIAB) quarterly survey, more than 66% of small and mid-size accounts and 59% of large accounts saw increases of 10-30% during the last three months of the year.Premiums held steady for just 9% of small accounts, 7% of mid-size and 4% of large accounts.All lines were affected, brokers report, with the largest increases coming for commercial property, construction risks, directors & officers and umbrella coverage.”We are well into our second year of hard-market conditions, and a substantial part of the commercial market continues to watch premiums increase across the board,” says CIAB president Ken A. Crerar. “There is little indication that the market is softening in any significant way for any line of business or for any size of account.”Commercial buyers continue to use higher deductibles, self-insurance or “going bare” without coverage, to try and mitigate the increases, brokers add.And alternative financing is becoming more popular, with 74% reporting increased usage of these mechanisms, most often surplus lines. “Such a large migration to surplus lines means there is a great deal of business that is not being written by primary insurers,” Crerar says.Brokers continue to report less than warm responses from insurers, complaining of last-minute quotes, reduced markets and difficulty placing anything but the cleanest of accounts.They are also concerned with the financial viability of carriers, with 97% noting this as a greater concern than before. And the terrorism market is still a conundrum, despite the passage of the U.S. terrorism government backstop. “It’s apparent that many insurers have still not developed a pricing strategy for the terrorism product,” says Crerar. “We hope that with a few more months of experience, clearer pricing and market trends will begin to emerge for terrorism coverage.”