Insurance Providers

October 27, 2008

During the third quarter of 2008, commercial property and casualty premiums have continued their downward slide. There are however, according to commercial insurance brokers, suggestions that for small and mid-sized accounts, the market decline may have reached a peak, as seen between July and September.

The latest Commercial P/C Market Index Survey taken at the beginning of October by The Council of Insurance Agents & Brokers (CIAB), does not reflect the complete impact of the financial crisis and the close to complete collapse of insurance giant AIG, meaning that the fourth quarter may still tell a different story.

CIAB president Ken A. Crerar says that the industry won't know until the time of January 2008 renewals the possible toll that the economic crisis has taken on the industry in general. He says that it is clear however, that investment income is down dramatically, carrier profitability has dropped, there are higher net underwriting losses and combined ratios are moving up to over 100. Nobody really knows how long carriers can maintain price cuts without damage to their financial health. As Mr. Crerar puts it, these are very uncertain times.

According to data reported by the survey, 69 percent of the commercial agents and brokers that responded to the survey reported that premiums for their small account renewals were down only 10 percent or less - compared with similar renewals during the second quarter. Another 20 percent reported no change. With regard to medium account premiums, 53 percent of those responding said that their premiums were down 10 percent or less compared with second quarter renewals. There were 7 percent reporting no change.

The survey showed that the premiums for large accounts, which went up the most and the greatest during the hard market cycle, were still dropping. While 8 percent reported no change, 29 percent of the respondents said their large account renewal premiums were down up to 10 percent as compared to the previous quarter. Of those responding, 35 percent indicated renewal premiums down 10-20 percent, while 18 percent said premiums were down 20-30 percent when compared with the second quarter.

Barclays Capital Equity Research’s analysis of the CIAB's survey findings show that during the third quarter, premiums for the average commercial account declined by a reported 11 percent. The rates were down 13.2 percent for large accounts, while compared with the second quarter, for medium accounts, renewal premiums dropped 12.1 percent, while for small accounts, the renewal premiums averaged a decline of 7.8 percent.