Property/casualty insurance rates declined 9% on average in January compared with rates a year earlier, MarketScout reported Thursday.

The declines affected all of the lines monitored by the Dallas-based electronic insurance exchange, and ranged from 10% for business owners policies to 5% for directors and officers liability coverage. In general, MarketScout said the larger the account, the greater the decrease, with the largest accounts experiencing rate drops of 10% while the smallest registered 8% declines.

"Insurance executives are forecasting and closely monitoring the prospects for much-needed rate increases in 2009," Richard Kerr, chief executive officer of MarketScout, said in a commentary accompanying the January report.

"However, the most daunting challenge may be the economy," he said. "While rate adequacy is challenge enough, the health of the U.S. and world economies are playing a large role in the fortunes of insurance companies and brokers. Lower payrolls and receipts are resulting in lower premiums and severe pressure on expense rates. Insurers and brokers are faced with diminished premium bases before they even consider the terms of renewal or rate." Mr. Kerr added that "if your exposure base is down 20% and you renew 90% of your customers, you only capture a true premium renewal rate of 72%. The resulting lower retention puts incredible pressure on new business initiatives in order to maintain premium volume, all while insureds are trying to save even greater amounts of money across the board. The result: More insureds will take bids in 2009, and insurance companies will be forced to participate in the process. While we expect upward movement in prices, we don't expect dramatic swings in the near term."

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