Upfront: Insurance Market Softening?

After weathering a typhoon of price increases over the past few years, the commercial insurance market may be headed for calmer waters. According to the Risk and Insurance Management Society Inc. (RIMS) and Advisen Ltd., premiums for property insurance fell 8.8 percent in the fourth quarter of 2003. That's the first price decline in any major line of coverage in nearly four years.

Although premiums for directors and officers (D&O), excess liability, and general liability coverage continue to rise, the rate of those increases has slowed considerably. "Price increases have either stabilized or retreated in most lines, and the next few months should make renewals and new placements a bit less challenging than in the past few years," says Christopher Mandel, a former president of RIMS who has also served as chief risk officer for the organization.

In addition, the number of policies companies need to achieve their target coverage level has declined in several lines, including D&O and excess liability. These falling policy counts indicate that even though costs continue to rise, supply is catching up with demand.

"We can't predict what the market will do," notes Thomas P. Ruggieri, Advisen's CEO, "but given past performance -- where slowdowns in rate increases, coupled with declines in policy counts, eventually amounted to declines in premiums -- there are indications that excess liability and D&O could be in for changes in the coming months."