Tuesday, 8 April 2008

Q1 2008 Premiums: No broad market impact by subprime

Advisen released the results for Q1 2008 of the RIMS Benchmark Survey. See the press release here. The picture continues to be good for buyers and not helpful to broker earnings nor the long-term profit picture for insurance underwriters.

The cycle has not found bottom despite incredible financial market turmoil. My post yesterday discussed how Lloyd's is not concerned. Advisen clients I speak with are of mixed minds - those that are in the market for professional lines insurance (e.g. directors & officers, errors & omissions, crime) to financial institutions (lenders, investment banks, funds), those guys are not comfortable with what they have written and are looking forward to the influx of claims that will shake up who writes what and how this volatility will increase pricing in this space quickly.

We have to wait and see how litigation progresses - currently we are tracking 259 cases, including 62 securities class actions related to subprime and the credit crisis. The potential is for the concentric circles of loss to mount into something that has ripple effects within the markets far beyond D&O for financial institutions. See a recent post about this here.

The results have been picked up in the trade press already with an additional quote by Advisen's Dave Bradford in a story by Financial Week here.

Mr. Bradford said financial services and investment businesses, which have been
hit hard by the subprime mortgage meltdown, will see directors and officers’
liability insurance rates rise because of the increase in claims they face. But,
he added, there will be a steady decline in rates for most companies not exposed
to mortgage losses. “It wasn’t until the first quarter that underwriters pushed
through significant rates increases for financials. But it hasn’t spread beyond
that fairly narrow group.”

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