Financial institutions’ directors and officers market has hardened but rates are flat or modestly down in other product lines, according to RIMS survey

Commercial insurance premiums continued to slide despite the economic crisis, found a Risk and Insurance Management Society (RIMS) benchmarking survey.

A ‘soft landing’, where rates gradually turn harder, is far better for buyers than an abrupt reversal resulting in brutal rate increases. Early indicators suggest this is the case, according to the survey.

Most of the commercial insurance market in the first three months of 2009 saw a continuing trend of little or no change in rates, reported the North American corporate risk managers.

Banks and other financial institutions, however, bought directors and officers (D&O) insurance at substantially higher rates.

Advisen recently forecast that a dramatic shift to higher rates is unlikely and that commercial insurance buyers will see a more gradual hardening of the market.

General liability premiums fell 3.8 % for policies renewing during the first quarter of 2009, as compared to a 5.9 % decline in the fourth quarter of 2008. The average workers compensation premium fell 2.5 % which is similar to price decreases over the past several quarters.

The average property renewal was flat for the first quarter as compared to a decline of 3.8 % in the fourth quarter of 2008. However, there was a wide range of changes in recent renewal premiums for individual property risks: premium changes ranged from a decrease of 11 % to an increase of 14 %.

The D&O market continued to be split between financial institution (FI) risks and all other (commercial) risks. Overall, the average D&O premium increased by 3.0 %, but the increase was driven entirely by financial companies. Excluding FI firms, the average renewal was down 3.0 %. Higher FI premiums are the outcome of massive losses from the meltdown of the subprime mortgage market and the ensuing credit crisis. By comparison, overall D&O rates fell 1.2 % in the fourth quarter of 2008 and fell 4.5 % during that period excluding FI firms.

‘Most risk managers continue to see flat or slightly lower premiums at renewal,” says Daniel Kugler, member of RIMS board of directors and assistant treasurer, risk management at Snap-on, Inc: ‘The insurance market is still very competitive and, while some insurers are predicting an imminent hard market, there are few signs that rates will rise sharply anytime in the near future.’