J Klein Associates Blog | Real Estate Insurance

More than half of all property renewals experienced increases during the fourth quarter as more accounts are finding it difficult to obtain savings on their insurance placements, according to a report released by insurance broker Marsh.
In its “Marsh Insights: Benchmarking Trends U.S. Property Rates, Fourth Quarter (To Date),” the broker says renewal rates increased an average of nearly 2 percent for the fourth quarter. Catastrophe-exposed property clients saw their rates increase an average of close to 7 percent, says Marsh.
Clients with little or no catastrophe exposure got lucky with nearly flat renewal rates.
Breaking the figures down further, Marsh says that 48 percent of its clients experienced increases during the quarter and 34 percent had reductions. The remaining 18 percent experience no change in their rates.
Most of the change was in the narrow range of 1-10 percent, with 29 percent experiencing increases within that range, and 21 percent renewing with reductions in the same range.
Marsh notes that with more than $70 billion in insured losses for the first three quarters of this year, insurers are seeking increases on many accounts.
“Notably, those with recent losses or poor loss histories or for accounts with moderate to significant CAT exposures” are getting hit with increases.
Those that have little or no catastrophe exposure or losses are experiencing rate reductions at renewals.
To control increases some insured’s have increased deductibles, reduced limits or “otherwise [altered] terms and conditions in an effort to control rising property insurance costs.” A representative from Marsh says these individuals were excluded from the rate change figures so the figures reflect pure renewals.
Marsh says the property insurance market is in transition, but not classified as hard. However, cost savings are increasingly difficult to obtain and more and more clients are facing “modest increases at renewal.”
Among some recommendations to buyers, Marsh notes that clients should pre-model their risk to properly evaluate the limits that need to be purchased. Over buying catastrophe limits can be expensive, but so too can underinsuring the exposure.

The Hartford broke even on its earnings for the 2011 third quarter, posting net income of $0 compared to $666 million in the 2010 third quarter.
Executives describe the period as a very challenging quarter due to catastrophes and charges affecting its bottom line.
Revenues dropped 32 percent in the quarter, or $2.08 billion, to $4.5 billion.
The third-quarter results were affected by $134 million in catastrophe losses and a charge of $227 million for deferred-acquisition costs (costs insurers incur in the acquisition and renewal of insurance contracts).
For the nine months of this year, net income has slipped 50 percent, or $526 million to $535 million.
The company’s combined ratio for its commercial business jumped 19.9 points to 104.8 for the third quarter and rose 14.8 points for the nine months to 102.8.
On the personal-lines side, the combined ratio was up 12.7 points to 106.8 in the quarter, and for the nine months it increased 6.5 points to 105.
The company has achieved rate increases on renewals of 4 percent in auto and 8 percent in homeowners. With the weather losses, the company is adjusting its prices accordingly, according to The Hartford’s Chairman, President and Chief Executive Officer Liam E. McGee.
He tells financial analysts during a conference call today that while the company has seen its share of difficulties brought on by a weak economy, nine different catastrophes and a volatile investment environment, it was a “good test for the improvements we have made throughout the organization.”
He says the underlying results of the company “were strong” and in line with predicted results.
“While I am disappointed with this quarter’s bottom-line result, I am proud of what the team has accomplished,” McGee says. “If we had faced similar economic and market challenges when I joined the company two years ago, the Hartford results would have been significantly worse.”
While the company’s portfolio of investments and capital is strong, he says the Hartford is pushing for “meaningful rate increases” in its businesses and is “seeking profitability not volume” in its commercial property and casualty business. Pricing is also improved in its group-benefit lines.
The drive for price increases, McGee says, will continue into the fourth quarter and next year.
P&C commercial written premium was up 7 percent in the third quarter and renewal pricing increased 4 percent, says McGee.
“We’ve seen a sequential increase in renewal rates each quarter this year,” he adds.
The company saw growth in its affinity business and wealth management segment.
During the call, Christopher Swift, executive vice president and chief financial officer, says the company is experiencing growth in all lines of business and rate increases are beginning to outweigh liabilities.
The company continues to work on expenses reducing its workforce by more than 1,700 positions, not including divestitures, since 2010 and closed 13 locations.
He adds that it is “critical” for the company to become more efficient and the Hartford is on track to reducing run rate expenses by $200 million by the end of 2012.