RIMS Survey Shows Ongoing Price Cuts

by Stewart Douglas

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The RIMS Benchmark Survey of industry pricing was released today, reflecting a continued reduction in market pricing of commercial policies industry-wide over the course of the third quarter of 2007, thanks to an increasingly competitive and catastrophe-free business environment.

According to the official figures released today, pricing across commercial insurance lines has continued to erode at a primary level across core product offerings, suggesting an increasingly competitive and consumer-led marketplace.

It was only property insurance lines that highlighted a general upturn in the face of the trend, largely as a result of increasing costs through earthquake and flood damage, with most other commercial lines backing up the downwards turn in policy pricing. Property lines have consistently proven in previous quarters to be growing against the grain of more general erosive trends.

The Directors’ and Officers’ (or D&O) insurance category saw the most significant decrease in average pricing over the period, down 3.9% on the costs in the second quarter in reflection of the increasing availability of this kind of protection.

General liability product premiums were more expensive by around 3.2% over the period, largely down to the perceived heightened risks from problematic credit markets and unhealthy market trading from the sub-prime, which followed the largely downward trend of most policy pricings over the period.

The average price of employee compensation cover were down by a lesser rate than had previously been the case, suggesting the market could be nearing a more stable price point. The drop experienced was in the region of one and a half percent over the third quarter.

However the news looks optimistic for the final quarter of 2007, with most analysts predicting an upturn in figures against the price erosion witnesses through Q3 this year with underwriting and increasing investment dividends set to prop up the figures.