Heading into the hurricane season, average property premiums plummet, say North American risk managers
Average premiums fell for all major commercial line insurance in the second quarter of 2008, according to a RIMS survey of North American risk managers.
After dropping sharply in the first quarter, the average Directors' and Officers' (D&O) premium fell a comparatively moderate 6.4 % in the second quarter. D&O claims related to the subprime mortgage crisis continue to mount, but so far only financial and real estate firms with subprime exposure have experienced price increases.
The 6.1 % decrease in premiums for property insurance essentially repeated first quarter price decreases for renewals, even though forecasters now predict a severe hurricane season.
“We are now in hurricane season and a bad storm could bring a quick end to the soft market.
John Phelps, director of business risk solutions for Blue Cross
The decrease in average general liability premium was nearly 5 %, up from 2 % in the first quarter. After an unexpected 11 % drop in the first quarter, the average workers’ compensation premium fell just 1.7 % in the second quarter.
John Phelps, director of business risk solutions for Blue Cross and Blue Shield of Florida and RIMS board member, said: ‘We are now in hurricane season and a bad storm could bring a quick end to the soft market. While the direction of the market could change quickly, pricing trends otherwise continue to be favorable for risk managers. Reinsurers and primary markets are agonizing over falling premiums, but they also are concerned about forecasts of higher than normal hurricane activity this year.’
See also: Munich Re lowers profit expectations