Commercial rates continue moderate decline: RIMS

Commercial insurance rates continued their moderate decline for the fourth straight quarter, finds the latest market survey by the Risk & Insurance Management Society (RIMS) and Advisen.The fourth-quarter 2004 benchmark survey took in its greatest number of respondents ever, and showed that last year represents the longest sustained period of soft market pricing in the new millennium.Price declines were “almost universal”, according to risk manager’s data filed. The only lines where declines were not seen were workers’ compensation (WC) and employment practices liability (EPLI), although WC premiums jumped up just 1.5% in the U.S. Property premiums dropped an average 7% in the fourth quarter, even in the face of the record Atlantic hurricane season in the U.S. Liability lines including general, directors’ & officers’ (D&O), umbrella/excess and fiduciary, all saw premiums decline in the quarter, although by a more modest 2%.Despite price declines, RIMS and Advisen representatives say economic pressures should keep the pace of market softening to a moderate level, as capacity for many lines remains lower. “Risk managers should be pleased with the pricing trends, but underwriters also should be happy that premium reductions have been fairly moderate compared to the cutthroat competition of last soft market, and that the industry seems to have returned to financial health,” says RIMS vice president of membership, Daniel H. Kugler.”This is a long slow march through a soft market, driven by growing p&c industry surplus, which translates into increased capacity,” says David Bradford, editor-in-chief at Advisen. “But, viewed in relationship to gross domestic product (GDP), industry surplus is essentially at 2000 levels, well below its peak in 1998, and the insurance industry’s returns still significantly lag the S&P 500, all conditions that should prevent prices from slipping into a freefall.”The RIMS survey includes data submitted from risk managers across North America.