Despite subprime D&O rates continue to decline

Premiums across all financial, executive and professional lines of insurance are decreasing to the levels seen in 1999 and 2000 – the low point of the last soft market, according to a survey of London market insurers.

The index, conducted by Willis’ Financial Executive and Professional Risks (FINEX) division asked participants for their views on the underwriting market over the past three months and their predictions for the next three months for financial institutions, D&O liability and professional indemnity risks.

The index polls London-based insurance companies.

For the third quarter average premium discounts in the financial institutions (FI) market were around 10%, said the research. Underwriters surveyed by Willis are predicting that this state of affairs will remain unchanged during the next quarter and possibly even beyond 2008.

In addition, widespread flooding in England, the sub-prime crisis and resultant credit crunch have, so far, had little effect on rates in the FI insurance market.

Over the last three months, 23% of insurers reported flat rated renewals in the D&O market; of those insurers reporting reductions there was an even balance between reductions of up to 10% and reductions of up to 20%. The majority of D&O insurers surveyed predicted smaller reductions of up to 10% in the fourth quarter of 2007.

The continuing reduction in rates across the entire professional indemnity (PI) arena was reflected in Willis’ third quarter index. While insurers surveyed felt that rates could fall to similar lows as the 1999/2000 period, this may not occur for some time. The Willis PI index found that with the increasing market capacity available, insurance buyers can in some cases utilise premium reductions to purchase additional limits.

Commenting on the findings, Roland Avery, Chairman of FINEX said: “It was without doubt a buyer’s market for financial, executive and professional risks and the general consent is that it will continue through to 2008. However, sub-prime and an economic slowdown have the potential to change the landscape dramatically and we will be keeping a close eye on the marketplace over the next quarter.”