Property and Casualty

The Property/Casualty Insurance market has been surprisingly level throughout 2009 in spite of predictions that decline in investment revenue would cause insurers to increase rates in order to improve underwriting results. Instead competition kept pricing down and only a couple areas experienced rate increases.

In the first two quarters of 2009 insurance rates hardened in the financial institution world across professional liability lines. Some publicly traded corporations saw price increases and coverage restrictions on their directors & officers liability and employment practices liability coverages. By mid year even these changes were starting to level off.

Not unexpected was the huge impact the recession had on employment levels and revenue. With exposures reduced, companies saw further reductions in their premiums. As a result, carriers tried to gain market share on new business and pushed for rate decreases on renewals. Early in the year underwriters attempted to get slight rate increases, but ultimately gave in to retain business.

According to a market survey by the Council of Insurance Agents and Brokers (CIAB), rates on an average have declined 6 percent during the third quarter of the year compared with 5 percent in the second quarter. General Liability, Property, Inland Marine, Umbrella and Employment Practices Liability rates were down even more in October than in September. This marked the reversal of a moderating trend of rate declines starting back in December, 2007 when a 16% decline was reported. By industry class, the most aggressive rate reductions were experienced by manufacturing accounts, down 6%, while large accounts remained the most competitive.

For 2010, we expect the market to remain level. Improved investment income has helped insurers' bottom lines and the small amount of catastrophe/storm damage in the US in 2009 has helped underwriting results. Financial institutions may still find that underwriters require more underwriting information, but renewals will not be seeing such drastic rate increases.

In the coming year it will be interesting to follow industry debates on global warming. We do not expect to see rate increases in 2010 unless driven by individual loss experience. We will have to wait and see what happens next year during hurricane season but if we do experience severe losses it will likely impact 2011 renewals.