Category Archives: Property/Casualty

Soft Market Far From Over: RIMS

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According to the Risk and Insurance Management Society’s (RIMS) annual benchmark survey, commercial insurance pricing changed very little in the fourth quarter of 2010. The report, administered by Advisen Ltd, found that general liability, property and workers comp policies renewed with hardly any change in premium, on average. According to a press release issued today by RIMS:

“We have seen more carriers exercising underwriting discipline – walking away from business that does not meet their pricing targets – but it is still a very competitive market,” says Robert Cartwright, loss prevention manager for Bridgestone Americas Holding, Inc. and a member of the RIMS board of directors. “Premiums have stabilized a bit over the past couple of quarters, but they still are far below 2003-2004 levels. In some lines they are back to where they were during the soft market of the 1990s. It remains a buyer’s market.”

Though most premiums remain unchanged, average D&O premium did make a move. The report states that the average D&O premium fell 4.6%, though larger companies saw a slightly sharper decline while smaller companies saw only a minuscule drop.

In the February issue of Risk Management, our fearless editor in chief, Morgan O’Rourke, tackles the state of the property/casualty market in our annual P/C Market Outlook. Check here February 1st to find out more.

2011 Insurance Renewal Rate Changes by Segment

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Guy Carpenter broke down the typical insurance rate drops — or in the case of Marine & Energy and Credit, Bond & Political Risk, rate increases — companies are seeing so far in 2011.

Insurance buyers should enjoy the reduced premiums now — because the soft market won’t last forever.

Despite the declines, “2010 will prove to be the beginning to the end of a six-year soft market cycle,” MarketScout CEO Richard Kerr said in a statement. “While rates were still down for all of 2010, they did moderate and held steady at smaller reductions in a tight range,” declining 3% to 5%.

“We anticipate slight reductions on competitively marketed placements for the first six months of 2011 and flat renewals for accounts not under market pressure,” Mr. Kerr said. “By year-end 2011, the longest soft market period in the last 70 years will finally come to a close.”

What’s the saying? All things end badly. Otherwise they wouldn’t end.

Get it while the getting’s good.

Australian Insurers Brace for Worst

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Close to 348,000 square miles across 20 towns are flooded and 200,000 residents affected after heavy rains drenched Queensland and neighboring states from December 25 to January 3.

The effects of the flooding are far-reaching. Reports indicate Queensland-based insurer SunCorp has told the Australian Stock Exchange it has received 1,800 claims so far. A JP Morgan analyst has said that losses to the insurance industry due to the flooding are estimated at $1 billion. The Insurance Council of Australia (ICA), however, has said that it is too early to provide a loss estimate.

The worst flooding in decades has affected an area the size of Germany and France, leaving towns virtual islands in a muddy inland sea, devastated crops, cut major rail and road links to coal ports, slashed exports and forced up world coal prices.

Coal production in Queensland has been severely disrupted. “The Queensland Resources Council said lost coal and gas production would run to hundreds of million of dollars.” Economists have projected a $6 billion loss from reduced export volumes.

Key crops such as cotton, sunflower, sugar and wheat have been gravely affected by the floods and, according to the Queensland Farmers Federation, few farmers have flood insurance. Crop losses alone could exceed $1 billion.

Below is a video of the “biblical” Australian floods that have claimed the lives of 10.

Needless to say, the property damage in Queensland and neighboring states will be a hard hit to the country’s insurers.

Florida Sinkhole Claims Skyrocket

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It seems the entire state of Florida is slowly caving in as more and more sinkholes appear throughout the sunshine state, resulting in a tripling of insurance claims in five years. According to a new state report, for the years 2006 through 2010, sinkhole claims have cost Florida property insurers $1.4 billion — a number that could reach $2 billion by the end of this year.

The report, authored by the state’s Office of Insurance Regulation, says sinkhole costs increased from $209 million in 2006 to $409 million in 2009, with the largest share of the total expense coming from structured loss (54%) and land loss (27%). In 2006, open claims totaled more than $3.3 million for expenses paid and $13.6 million for indemnity. By 2009, these numbers increased drastically to $29.5 million and $114.6 million respectively.

“There is no question that the tripling of frequency of claims will have a significant expense associated with adjusting these claims in Florida and will continue to put upward pressure on rates,” [state Insurance Commissioner Kevin McCarty] said Tuesday.

The bulk of the claims come from an area known as the Sinkhole belt — Hernando, Pasco, Hillsborough and Pinellas counties. McCarty has cited sinkholes as one of the major cost drivers of insurance premiums in the state. As a solution to the problem, McCarty is looking into changing policy language regarding the definition of structural damages or possibly creating a sinkhole insurance fund. Though McCarty and his team are brainstorming ways to deal with sinkholes without raising insurance rates, an increase is likely unavoidable. The state’s largest property insurer, Citizens Property Insurance, cited the cost of sinkhole claims in requesting a rate increase for next year. The insurer said it took in $19.6 million in premiums for sinkhole coverage in 2009 but has paid out $97 million in claims cost.

Here’s a well-crafted news clip from a Central Florida station about the growing number of sinkholes and the importance of insurance coverage.