Premium rises in the commercial classes so far this year are well above industry projections, according to a “year to date” report released yesterday by JP Morgan/Deloitte Touche Tohmatsu.

They have risen by an average 14% in the year so far, with the June renewals expected to rise another 1%. Personal lines policies have risen only 6%, with another 1% jump predicted.

Most of the increases are a natural result of the upturn in the insurance cycle, disproving media claims that they have been caused by HIH collapse. However, JP Morgan analyst Shane Fitzgerald said the collapse has allowed insurers to bring forward premium rate increases that were previously expected to occur over the next 12-18 months.

“Significant premium rate increases were required to restore profitability to an adequate level,” he said. “As such, the increase… is not surprising.”

But Peter Caldwell, Chairman of Deloitte’s National Insurance Industry Group, said the 17% rise in Fire/ISR, for example, will still see the premiums about 20% below 1995 levels.

Overall Liability, PI and D&O are the business classes most affected by the collapse of HIH, because these were the classes in which the fallen giant was dominant. Professional liability’s largest premium median rate increase was 124% – the highest of any class of business.

Liability premiums have risen by 19% so far this financial year, and will rise another 1% in June. But the market predicted this outcome last year, before the HIH collapse.

PI rates have risen by 15% so far, and will go up another 4% next month. D&O rates are up 10% on the last financial year, with another 2% rise on the way.

Reinsurance is trending up, too. Mr Caldwell said yesterday that underwriters expect reinsurance rates to rise by an average 15% next month – 9% higher than the industry originally anticipated.

“This is expected to have a dampening effect on the profit impact of rising direct premiums as reinsurers move to recoup the large losses suffered in recent years,” he said. 

The amount of 2001 rises now expected to be reached (with the industry’s expectations late last year in brackets):

• Domestic motor 10% (9%);
• Householders/homeowners 8% (5%);
• Underwritten workers’ comp 10% (10%);
• Fire/ISR 17% (12%);
• Commercial motor 13% (9%);
• Liability 20% (17%);
• PI 19% (10%);
• D&O 12% (6%); and
• Outwards reinsurance 12% (6%).

The highest single premium rate increase recorded by the JP Morgan/Deloitte Touche Tohmatsu report was achieved in PI – a whopping 600%.