Commercial lines insurance premiums experienced the largest quarterly drop since 2005 during the first quarter of 2008, according to the RIMS Benchmark Survey™, an industry survey of policy renewal prices as reported by corporate risk managers.

Undeterred by mounting claims from the meltdown of the subprime mortgage market, the average directors and officers liability (D&O) premium fell 19 percent in the first quarter – the largest decrease of all the lines of business tracked by Advisen for the RIMS Benchmark Survey™.

Other findings:

• Continuing the trend of steady, moderate decreases exhibited during the past two years, general liability premiums fell another 2 percent.
• After demonstrating a moderating trend over the course of 2007, workers compensation price decreases surged during the first quarter, falling 11 percent.
• In a clear indication that competition is returning to catastrophe-exposed regions, property premiums fell 6 percent – the largest quarterly decrease since Hurricane Katrina.

"We expected to see the soft market continue into 2008," says John R. Phelps, ARM, CPCU, member of RIMS board of directors, and director of business risk solutions for Blue Cross and Blue Shield of Florida, Inc. "Not only are soft market conditions ongoing, they appear to be accelerating, due in no small part to the excellent combined ratios for key markets. This bodes well for insurance buyers this year."

"Frankly, we were surprised to see downward momentum building at this pace," says David Bradford, editor-in-chief of Advisen. "It is an indication of just how overcapitalized the commercial property/casualty insurance industry is. Rapidly deteriorating rate levels will probably wipe out insurer underwriting profits this year, but if there are no major catastrophes, premiums should still continue to fall for a while."

“Knowing it was a soft market, we expected premiums to drop somewhat,” says Bruce Lidstrom, general manager of NAMIC Insurance Agency. “Companies have experienced good underwriting results, which not only keeps prices down but brings new players into the market. Because many of our members are smaller insurance companies, I don’t think we will see the type of price decreases that apply to very large commercial insurance writers, but we will see some downward trend in pricing.”

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Source: Risk and Insurance Management Society

 Copyright 2007, National Association of Mutual Insurance Companies (NAMIC).