Property insurance rates increased sharply in the fourth quarter of 2005, according to the RIMS Benchmark Survey, the survey of current policy renewal prices as reported by corporate risk managers.
According to the survey, some commercial insurance buyers saw property premiums increase by as much as 33%, with a median increase of 8%, in the fourth quarter.
The premium increases were driven by record-shattering insurer losses as a result of the destruction caused by Hurricanes Katrina, Rita and Wilma, estimated by Advisen to cost the insurance industry nearly $58bn.
However, RIMS said that while some analysts have predicted that the hurricane losses would also spark higher premiums in other lines of insurance, there was no evidence of
that in the fourth quarter numbers for casualty lines.
Directors and officers liability renewals were flat and general liability renewals were down 3%.
Karen Beier, member, RIMS board of directors, membership and chapter services portfolio, said: “The insurance market shrugged off the record hurricane losses of 2004, but
the combined impact of Katrina, Rita and Wilma was clearly more than the market was ready to absorb in 2005.
“So far it seems only property insurance has been affected, but it remains to be seen if the rise in property rates will be the catalyst for an overall upturn in prices and a
harder market.
David Bradford, editor-in-chief at Advisen, siad: “As anticipated, the three major hurricanes in 2005 stopped the soft property insurance market in its tracks, but only time will tell if the aftermath of these storms will impact other lines of insurance.
"Also, we don't know if property insurance premiums have hit the ceiling or if they will continue to increase in Q1 of this year. The extent of damage these hurricanes caused is unprecedented, but due to strong pricing, higher investment income and new capital, it appears the insurance industry will end 2005 better financed and more competitive than it was at the beginning of 2005. Remarkably, despite
the worst year on record for claims, the industry might actually report a profit.”
