The associated table shows “typical” changes in premiums at 2010 and 2009 renewals for six types of liability coverage. Developed by Marsh and published in its U.S. Insurance Market Report 2010, the table shows “typical” changes in premiums for two types of general liability policies, umbrella and excess coverage, and two types of automobile insurance. Caveaf: Marsh does not define its terms large and midsize. Butin other Marsh studies of property and casualty costs, large organizations have more $1 billion in revenue, while revenue at midsize organizations is in the $200 million-to-$l billion range.
In reviewing this table, controllers will see that the buyer’s market for liability coverage continued during 201 0 renewals. At midsize organizations, for example, the range for 2010 renewals ranged from flat to 5 percent for all six types of coverage. Key point: While typical premiums for “average/good” midsize risks did not rise at renewal, the depth of potential premium reductions – 10 percent – was greater in 2009.
Observations from Marsh about the costs of these six types of liability coverage include:
* General liability: “Strong competition is likely to continue. Absent a catastrophic event, rates are likely to be flat to a 5 percent decrease.”
* Umbrella and excess liability: “While insurers are looking to write U.S. lead umbrella business, their target segment appears to be midsize or smaller accounts. For larger firms, the excess market is not as competitive. Such insureds may consider taking a higher retention for a competitive renewal.”
* Loss-sensitive programs: “lnthis economy, underwriters have stepped up their scrutiny of clients’ financials, leading to a more conservative approach to the acceptability, form, and amount of collateral that secures obligations under loss-sensitive programs. [Here] clients faced with the escalating cost of letters of credit and increasing restrictions on their ability to borrow will benefit by minimizing their need for collateral.”
In addition, Marsh offers this observation about the structure of coverage, which CR readers should consider as they plan propertyand casualty coverage. “Diversification was a key issue for many companies in 2008, following some significant concerns with financial conditions at several large insurers. While it was difficult for insureds to leave primary carriers due to collateral issues, diversification did occur in the excess liability area. This was less in vogue at the end of 2009, as many clients had adjusted their mix of insurers over the previous 12 months.”
Typical Change for Six Liability Coverages at Renewal for Average and Good Risk
Copyright Institute of Management & Administration Apr 2010
(c) 2010 Controller’s Report, The. Provided by ProQuest LLC. All rights Reserved.