Copyright 2003 American Banker, Inc.  
The American Banker
July 24, 2003, Thursday
SECTION: INSURANCE PRODUCTS; Pg. 10

LENGTH: 550 words

HEADLINE: Property/Casualty Pricing Seen Softening During 2Q

BYLINE: BY DAVID REICH-HALE

BODY:
The latest Commercial Market Index Survey by the Council of Insurance Agents and Brokers has found signs that the hard market for property/casualty insurance is softening, if only slightly.

This could mean that insurance brokers, including bank-owned agencies, will have an easier time placing commercial property/casualty business, said Coletta Kemper, the vice president for industry affairs at the Washington-based trade group.

"Obviously it's easier to please a customer in a settled market, and not only with price but with terms and conditions," Ms. Kemper said. "It's good news because there is more of a market for their customer. But commissions will level off a bit, but business picks up, and that makes up for it."

However, the second-quarter survey of CIAB members showed a market that is hardly back to where it was a decade ago, when pricing was soft.

"The hard market started in the fourth quarter of 1999, picked up in 2000, and then came Sept. 11, which really drove the market," Ms. Kemper said. "Medical malpractice is still a real problem, as is workers' compensation in some states, like California and Florida."

Respondents also said they were worried about carrier solvency, ratings downgradings, and adequacy of reserves for such risks as mold, asbestos, and other environmental hazards.

CIAB members are the larger insurance brokers. The organization said it represents brokers who annually place more than 80% of U.S. commercial property/casualty premiums and also administer billions of dollars in employee benefits programs.

The market index survey produced evidence that price increases for commercial property insurance were moderating by comparison with the year earlier, Ms. Kemper said, and that some prices were falling. About 55% of the 125 respondents reported that premiums were up as much as 20%, 17% said premiums were unchanged, and 15% said they had fallen as much as 20%.

About 60% of respondents said smaller accounts -- defined by the CIAB as those yielding less than $25,000 in commissions and fees -- had some sort of rate increase; 15% had no change. The bulk of the increases, 38%, were of 1% to 10%.

For accounts with $25,000 to $100,000 in commissions and fees, 76% of respondents had an increase but nearly half was in the 1% to 10% range.

For the largest accounts -- defined as those with more than $100,000 in commissions and fees -- 68% of respondents reported higher premiums, almost all of them 1% to 20%.

"Again, we are a long way from a soft market," Ms. Kemper said.

Terrorism insurance is more available than it was six months ago, said 85% of the brokers. The only problem is for so-called trophy properties. However, 72% said their commercial customers are still not buying it.

More than 90% of the brokers said their customers pass on terrorism insurance because they think it is unnecessary. This result echoes comments made by analysts last month in a report by Moody's Investor's Service that said many businesses were rejecting terrorism insurance, including some because they found the cost too high. Terrorism insurance does not cover biological, nuclear, or chemical weapons attacks.
 
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