Commercial Insurance Market Posts Full Year in Soft Market, But Overall Economy Should Prevent Pricing Freefall, According to Fourth Quarter RIMS Survey.

NEW YORK -- Commercial Insurance Prices Continue to Decline

The commercial insurance industry experienced a full year of a soft market in 2004, as the last months of the year represented the fourth consecutive quarter of declining prices, according to the RIMS Benchmark Survey(TM), the industry's only comprehensive survey of current policy renewal prices as reported by corporate risk managers.

The year of declining prices was the longest sustained soft market since the 1990s, but overall economic issues should ensure that insurance capacity remains at levels that discourage a pricing freefall, says the survey sponsors, RIMS and Advisen.

The fourth-quarter renewal information, which was released today, was summarized by Advisen Ltd. for the Risk and Insurance Management Society (RIMS). The data in this quarter's survey represents the most data ever collected in the history of the survey, Advisen said.

"The year ended pretty much as it had started with moderate, continuing declines in premium prices." said Daniel H. Kugler, RIMS Vice President, Membership. "Risk managers should be pleased with the pricing trends, but underwriters also should be happy that premium reductions have been fairly moderate compared to the cutthroat competition of last soft market, and that the industry seems to have returned to financial health."

"This is a long slow march through a soft market, driven by growing P&C industry surplus, which translates into increased capacity," said David Bradford, editor-in-chief at Advisen. "But, viewed in relationship to GDP, industry surplus is essentially at 2000 levels, well below its peak in 1998, and the insurance industry's returns still significantly lag the S&P 500, all conditions that should prevent prices from slipping into a freefall.

"The amount of data we collected this quarter offered a truly comprehensive view of industry conditions, making the market more and more transparent for risk managers seeking greater clarity on pricing and other decision-drivers," he continued.

Declines in the period were essentially across all major lines -- except EPLI and Workers Compensation -- representing the first quarter of this soft market in which declining premiums were almost universal. The survey also found that in the fourth quarter, property premiums suffered worst, dropping just about seven percent, despite one of the worst years for natural disasters in the United States, including four devastating hurricanes in Florida.

Directors & Officers (D&O) Liability, Umbrella/Excess Liability, Fiduciary Liability and General Liability premiums all declined in the quarter, albeit at moderate rates with most declining about two percent. Workers Compensation premiums, driven by diverse conditions on a state-by-state basis, showed mixed results for the quarter, but on average experienced a slight up-tick in premium levels (1.5 percent) across the country.

Looking back at 2004 on the whole, property and general liability led the market down, both showing average premium decreases by the fourth quarter of 2003 and sliding steadily lower throughout 2004. D&O teetered at the summit of its steep 2001-2003 assent into 2004, though the percentage of policies renewed with rate decreases steadily grew.

"By the third quarter, D&O premium decreases overwhelmed increases and the line joined property and general liability on the slippery slope down," said Mr. Bradford of Advisen.

The 2004 RIMS Benchmark Survey is scheduled to be published in March 2005.

Advisen, a provider of specialized information, analytic and benchmarking tools for commercial insurance professionals, analyzes the survey results continuously, offering a dynamic and virtually real-time window into the current purchase patterns of commercial insurance buyers. The results represent data compiled from over 1,400 organizations, the largest number of respondents in twenty years of benchmark surveys.

About The Benchmark Survey

Risk managers who contribute insurance schedule data to the survey can benchmark both the structure of their commercial insurance programs and the cost of insuring their risk against a highly-relevant group of similar companies. Additionally, survey respondents can use customized software to view detailed schedules of insurance programs for current and past years and to create full-color charts. Both benchmark charts and program charts download into any presentation for senior management.

The results of the RIMS Benchmark Survey are available online, published continuously throughout the year, and in a book, published once each year, Visit www.rims.org/benchmark for details.

Risk management professionals can contribute their data by e-mailing current and prior year policy schedules to [e-mail]. Data can also be sent by fax to Advisen at 212.655.7453. Advisen will input the data, making it available for online review and comparison within days. Participant support is available by calling 1-800-655-6590.

The Risk and Insurance Management Society, Inc. (RIMS) is a not-for-profit organization dedicated to advancing the practice of risk management, a professional discipline that protects physical, financial and human resources. Founded in 1950, RIMS represents nearly 4,000 industrial, service, nonprofit, charitable, and governmental entities. The Society serves 8,800 risk management professionals around the world.

Advisen Ltd. provides insight into underwriting, marketing and purchasing commercial insurance. Advisen's web-based workstation incorporates real-time analytics and research on over 1.5 million companies, and 70 industries. Advisen currently serves nearly 350 leading commercial insurers, insurance brokers, risk management departments of major corporations, and other related organizations. Proprietary offerings of the Advisen service include Benchmarking, Custom Templates for Company Work-ups, Company and Industry Research, Loss Analysis, Management Portfolio Analysis and Policy Comparisons. For more, visit www.advisen.com or call 212.897.4800.