U.S. commercial market reveals hardening and confusion

“Major commercial property/casualty premiums uniformly on the upswing and confusion in the market” is how the U.S. Council of Insurance Agents and Brokers (CIAB) is characterizing the post-September 11 environment. In releasing fourth quarter 2001 results of its Commercial Insurance Market Index the CIAB notes that for medium and large commercial accounts respondents report rate increases of 30-50% over the previous year. For small accounts the increase was in the 10-30% range, but for commercial property and umbrella coverage rate increases were as high as 50-100% over the previous year.Moreover, there is a sense of unrest in the marketplace as insurers struggle with reinsurance rate increases and coverage exclusions. “Underwriters are overwhelmed, don’t have reinsurance in place and can’t get quotes out on time. Many accounts [are being] transferred and re-underwritten,” one respondent says.Brokers report policy terms and conditions being tightened, with deductibles substantially higher and exclusions for such covers as terrorism and mold. “[The] main difficulty is that terms and conditions are often non-negotiable. It is either take it or leave it,” one agent comments. And many underwriters are requiring substantial information, with detailed loss histories from their clients.In response, brokers say they are looking to alternative markets, including excess/surplus lines, which were once seen as the market of last resort, as well as captives.”The market is clearly struggling,” says Ken Crerar, CIAB president. “The combination of liabilities from Sept. 11, Enron, and the big hit on state guaranty funds from the Reliance insolvency has the industry reeling. Congressional action on terrorism insurance would help stabilize the market, but we don’t expect to see a downturn in the market for a long time.”