The Risk and Insurance Management Society's "Benchmark Survey" found the bulk of renewals reported had been secured before the hurricanes impacted the market.

"Our expectation is that we're going to see a spike in property premiums quickly--then the question is if that will dampen out, or if it will drag up the rest of the rates with it," said David Bradford, editor in chief at Advisen, Ltd. in New York, which collects and analyzes the data and provides the technology infrastructure for the survey's online services.

He added that "with [Hurricane] Wilma [looming], all bets are still off right now."

What he expects as a result of Hurricanes Katrina and Rita is "to see property rates rise immediately and rates for other lines of business to stabilize." He said that only when the losses from the hurricanes mount and "the numbers become a little clearer will the industry react. If this is more than just an earnings event--if it does cut into capital--we would expect to see rates rise across the board."

The survey results showed renewal premiums down on average more than 5 percent against the same quarter last year. Directors and officers liability experienced the steepest decline, falling 8.45 percent. Property premiums fell just under 6 percent and general liability was down 5.2 percent. Workers' compensation was the only major line that was down less than 5 percent--posting a decline of 3.75 percent.

Advisen editors who manage the survey pointed to carrier financial performance as a catalyst for dropping prices. The property-casualty industry experienced record profits in the first half of 2005, leading underwriters to drive down renewal rates in a competitive scramble for increased revenue. They said the continued soft market has yet to feel the impact of the devastating hurricanes that hit the U.S. Gulf region.

"There is increased competition as carriers all vie for renewals in this profitable market. The natural market reaction is to drive down prices," Karen Beier, a member of the RIMS board of directors, said in a statement. She added that the devastation of Katrina and Rita is only now beginning to translate into higher renewal prices. "The whole picture could change dramatically in the coming quarters," she said.

Advisen said it conducted a secondary set of interviews with about 30 companies that had renewed programs on or after Oct. 1, and asked if the hurricanes had any substantive effect on pricing.

Most risk managers responded that they had already received indications of pricing by the time Katrina hit the southern United States and that those quotations were honored. However, some managers--who had either not yet received quotations or whose verbal quotations were not honored--said they experienced increases as high as 20 percent over the prices they had anticipated or had been originally quoted for their property insurance programs.

"Risk managers who saw their renewal prices drop said they felt lucky, because those who experienced the hurricane effect are now explaining to their management why renewal premiums just went through the roof," Mr. Bradford said in a statement.

He added that the real question is whether Katrina and Rita will "have a lasting effect and strengthen the market for a time--potentially in all lines of business, not just property--or whether this is a short-term blip in what has proved to be a pretty resolute soft market."

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 managers who saw their renewal prices drop said they felt lucky, because those who experienced the hurricane effect are now explaining to their management why renewal premiums just went through the roof."

David Bradford

Advisen, Ltd.