Hardening market conditions caused the average total cost of risk (TCOR) among 14 industries to surge by five percent in 2012, shows the 2013 RIMS Benchmark Survey, produced by Advisen Ltd.
In comparison, the TCOR increase seen in 2011 was only 1.7 percent over the prior year.
The annual survey, which includes data about 52,000 insurance programs from almost 1,500 organizations, found that mean TCOR rose from $10.19 per $1,000 of company revenue in 2011 to $10.70 per $1,000 of revenue in 2012.
Property premiums threw a hefty weight on overall TCOR; their cost of risk grew from $2.92 per $1,000 of revenue to $3.09 per $1,000 of revenue, a nearly six-percent increase within a year.
“While 2012 experienced a reduction in insured catastrophe losses, insurers continued to implement rate increases through the year” said Jim Blinn, executive vice president of Advisen's Information and Analytics unit and executive editor of the survey. “Continued pressure on underwriting results and a low interest rate environment motivated underwriting management to seek these higher rates.”
Advisen's review of umbrella and excess pricing and limit data showed that when prices dropped, insurance buyers tended to increase their limits; however, when prices increased, buyers were slower to increase their limits.
“Rates are rising, but our research shows that improving rates attract new capacity, which makes it difficult to sustain the trend towards progressively higher rates,” said RIMS Board Director Michael D. Phillipus. “The wealth of information available in the RIMS Benchmark Survey arms risk practitioners with powerful industry insight that can help shape their understanding of the market and allow them to fulfill their responsibilities with greater confidence and clarity.”
The 2013 RIMS Benchmark Survey is available for purchase at www.RIMS.org/book.
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