Prop cat premiums up in Q4 2006

North America/Bermuda

Property catastrophe insurance was the only line of business in the US insurance market which registered an increase in premium rates during the fourth quarter of 2006, according to the RIMS Benchmark Survey which monitors policy renewal prices as reported by corporate risk managers. The survey is produced by Advisen Ltd, an industry based information and analytics consultancy. The 6.6% increase in US property insurance premium prices was described as the continuing legacy of the 2005 hurricane season. According to Advisen, rate increases continue to affect not only property owners with coastal exposures in the Southeast, but also companies with windstorm exposures in Mid-Atlantic and Northeastern states, and earthquake exposures in California. However, according to a report by AM Best issued in December 2006, the property and casualty market’s combined shareholders’ funds increased by around 8.7% to $477.3bn over the course of the year as a result of high rates pricing and few catastrophe losses. Advisen anticipates that the increase in underwriting capacity will put insurers under pressure to reduce premium rates in 2007 so that even risk managers with coastal property exposures should see a fall in their insurance costs this year. Elsewhere, however, the soft market prevailed during the fourth quarter of 2006. Directors and officers (D&O) and workers’ compensation reported the largest decreases in premium rates with reductions of 5.1% and 7.% respectively. D&O continues to be a very competitive line of business with rate decreases further stimulated by a sharp drop in the number of securities class action suits filed in 2006, as tracked by Advisen—112 in 2006 as compared to 186 suits filed in 2005. Advisen said that competition in the workers’ compensation was due to reform measures passed in several large states.