|
Many experts are cautioning that we are on the verge of emerging from one of the longest Property and Casualty Insurance soft market cycles in recent history, a period in which premiums have been low and insurance companies actively competed for business. What we'll see over the next few years as the market hardens is some companies deciding to exit certain lines of business or geographical areas, offering reduced limits of liability, restrictions, or sublimits for certain coverages and reduction in services offered.
The course appears to be set.
The decline in reserve releases could indicate that the Property and Casualty Insurance market is set for a turn in the cycle that could come as soon as 2012, according to a financial analyst's report. Shrinking reserves could cause future problems for commercial insurers. According to Conning & Co., U.S. Property and Casualty insurer reserves fell by more than $18 billion in 2009 compared with less than $2 billion in 2008. Reserve drawdowns have been used by insurers to bolster insurer earnings during the past five years, but most of the redundancies have been removed, leaving insurers with little cushion in the event of adverse developments. In addition, premium levels are approaching the same levels as 2000, just before the most recent hard market, and the industry's combined ratio crept up to 101.7% as of June 30 from 101% a year earlier.
The commercial insurance industry's shrinking premium volume, increasing combined ratio, weakening investment yields and depleted reserves will increase pressure on insurers to raise rates. Financial data indicate that insurers may seek to increase prices as early as next year, according to a new Business Insurance white paper.
In a time like this, when a hard market may be approaching, it's more important than ever to have an experienced agent on your side to help you navigate risk and ncost control strategies BEFORE the rates rise.
In what may be another indicator of insurers' financial condition, a report from Fitch Ratings examining operating expenses of insurers in the Property and Casualty industry said that over the past five years "expense ratios have increased significantly, adversely affecting profitability and fueled in part by declining premium volume due to competitive market conditions and the economic recession." Because "material market hardening" won't happen immediately, "insurers will continue to be challenged to balance expense structures and still maintain underwriting and service capabilities."
The combination of all these factors could mean that to remain profitable,
insurers will have to raise rates-especially if losses mount.
At The Gaudreau Group, our professionals are well positioned to ensure that all of our clients weather any market conditions. Being part of the Renaissance Alliance allows access to superior Business Insurance options
and expert Risk Management services. Through our network of more than 90 offices located throughout New England, we can offer you all the advantages and clout of a large national insurance company while providing you with personal accountability and localized services. With virtually every carrier and program underwriters, within our reach, we can easily afford our clients the most efficient and cost effective review...IN ANY BUSINESS CLIMATE.
|
