Industry Turns Profit for 2005 in the Face of Record Adversity
April 24, 2006
HONOLULU--(BUSINESS WIRE)-- Industry Turns Profit for 2005 in the Face of Record Adversity. Despite Hurricane Losses, Overall Soft Insurance Market Continues
Although property & general liability insurance rates increased in the first quarter of 2006, all indications point to a continuing soft commercial insurance market according to the RIMS Benchmark Survey(TM), the industry's only comprehensive survey of current policy renewal prices as reported by corporate risk managers.
In keeping with the soft market conditions evidenced in the last six quarters, Directors and Officers (D&O) premiums dropped three and a half percent in the first quarter of 2006 and Worker's Compensation rates declined just over three percent.
The property and casualty insurance industry overall turned a profit in 2005, according to survey officials, despite ever-dropping prices and a projected $58 billion in hurricane losses, suggesting that competition among carriers would provide for a continuing soft market.
The enduring effect of last fall's hurricane season was still evident in property premium renewals as 70 percent of survey respondents reported higher premiums. Average rates rose by nearly seven percent in the first quarter of this year, though Advisen analysts suggested the market buoyancy was due more to underwriter support than to underlying market conditions. Property premiums increased in the fourth quarter of 2005 after having steadily declined since the third quarter of 2003.
"The property pricing increases were a knee-jerk reaction by underwriters to the hurricane catastrophe losses, but probably will not be sustainable," said David Bradford, editor-in-chief at Advisen. "The insurance industry posted a profit for 2005 despite record catastrophe losses and experienced strong growth in policyholders' surplus, indicating that rate levels are still stalwart and capacity is abundant in most lines. Conditions are ripe for further softening."
"The insurance market understandably appears a little unsettled by the massive hurricane losses of 2005," notes Karen Beier, member, RIMS Board of Directors, Membership and Chapter Services portfolio. "However, risk managers may experience further softening in the casualty market. Barring more major catastrophes, premiums should fall further this year."
General liability rates experienced an upward swing of 5.1 percent; previous quarter survey data showed steadily falling premiums since the fourth quarter of 2003. Advisen analysts believe that general liability premiums may have been temporarily pulled higher by the spike in property premium levels, but will return to the pervasive softening trend by next quarter.
The RIMS Benchmark Survey is produced by Advisen, Ltd., which collects and analyzes the data and provides the technology infrastructure for the survey's print and online services.
About The Benchmark Survey
The results of the RIMS Benchmark Survey are available online, published continuously throughout the year, and in a book, published once each year. Visit www.RIMS.org/benchmark for details.
The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit organization dedicated to advancing the practice of risk management, a professional discipline that protects physical, financial and human resources. Founded in 1950, RIMS represents nearly 3,900 industrial, service, nonprofit, charitable, and governmental entities. The Society serves 9,600 risk management professionals around the world.
Advisen Ltd. provides carriers, brokers, risk managers and other insurance professionals with an integrated analytics and information platform for insight to make key commercial insurance and risk management decisions. Advisen's over 400 clients access the on-demand, web-based service for research on 275,000 program transactions, 180,000 claims, 80 industries and 1.7 million companies and organizations. Advisen member firms gain higher value on the above information through analytic functions such as: benchmarking, work-up and submission templates, insurance program management, policy & law comparisons, loss & exposure analysis, corporate governance, financial metrics, news and significant case data. Over 40,000 insurance professionals use Advisen every day. Visit www.advisen.com.
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