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North American commercial rates down

Rates fell in almost every commercial insurance line in North America last year, despite the economic turmoil and the second-worst year on record for natural catastrophe losses.

The 2009 benchmark survey of more than 1300 insurers by the US-based Risk and Insurance Management Society (RIMS) found the average total cost of risk dropped 9.4% per thousand dollars of revenue last year.

The total cost of risk is the sum of insurance premiums, retained losses and risk management administrative costs.

However, global actuaries Towers Perrin says US commercial rates dropped less than 1% in the first quarter this year, which is the smallest decline in four years.

The company says its survey provides evidence that the soft market is reaching its end.

Rates for large accounts (over $50,000) have increased after being eroded in 2007 and 2008, but small-account commercial prices continued their pattern of steady, but smaller, decreases.

Towers Perrin says none of the surveyed lines saw a deepening of price reductions from the fourth quarter of last year and, for lines where prices fell, all first-quarter decreases were in the low single digits.

Anecdotal evidence suggests property insurance rates are continuing to rise in catastrophe-prone areas and declining slightly in non-catastrophe areas, reflecting the continuing high cost of property catastrophe reinsurance.