“If there’s a plus for many businesses in the global recession, it's that they can strengthen their insurance programs and protect themselves against the financial consequences of a wider range of potential exposures,” said Brian C. Elowe, a managing director in the Global Risk Management division of Marsh. “That’s critical in an economic cycle when profit margins are thin and most businesses can't afford to take on extra risk.”
According to Marsh’s report, except for large corporations with significant hurricane or earthquake exposures, businesses renewing their property insurance programs during the fourth quarter of 2009 generally either saw rates increase slightly or achieved reductions, ranging up to 5 percent. Those businesses with significant natural catastrophe risks generally were able to renew programs without rate changes or had increases up to 10 percent.
In major primary casualty insurance lines, such as workers’ compensation, auto liability, and general liability, businesses generally achieved reductions of as much as 5 percent on their renewals. Despite generally improving rates, primary casualty lines were not without challenges, as insurers tightened collateral requirements for loss-sensitive and deductible programs. Umbrella and excess liability rates generally remained flat to slightly down as capacity remained abundant.
Meanwhile, the 2009 fourth-quarter renewal results were mixed for buyers of directors-and-officers liability insurance. Conditions for banks and real estate investment trusts remained challenging, albeit with some signs of improvement. Meanwhile, businesses in other sectors typically saw their rates decrease by as much as 3 percent to 8 percent, with smaller companies generally obtaining the largest reductions.
For U.S. companies that have had to get by without difficult-to-obtain or commercially unaffordable forms of insurance, the report also identified a number of opportunities to buy some degree of protection at affordable rates or secure coverage they previously could not. A few examples:
- As businesses face expanded environmental risks marked by more aggressive federal and state regulatory enforcement, they can now generally purchase a wide range of environmental coverages at the lowest costs in years – and with better protection.
- Even as risks associated with privacy breaches and cyber outages have mushroomed, insurance for these exposures has become more readily available and now can be extended to cover loss prevention and mitigation services.
- With increasing U.S. legislation affirming employee rights and myriad exposures associated with corporate restructurings, businesses can shop for an array of competitively priced and enhanced insurance products to address employment practices liability risk.
- In some states, community hospitals that for years couldn't afford professional liability insurance now can often obtain the coverage from commercial insurers.
- Smaller energy firms operating oil platforms in the Gulf of Mexico and unable to get any insurance for hurricane risks since Hurricane Ike, may be able to purchase some coverage from insurers reentering the market.
- In the face of what many perceive to be elevated risks, property terrorism insurance costs have continued to generally drop, giving more firms the opportunity to afford this highly sought protection.
- With the credit crunch affecting the ability of many businesses to obtain letters of credit to secure "retro" or "deductible" insurance programs, such as those used for workers' compensation and other casualty lines, some surety companies have shown an interest in offering surety bonds to secure these programs, and insurers have been willing to accept them.
- There are new and expanded insurance coverages and risk management solutions to address supply chain risk, pandemics, and piracy in the Gulf of Aden.
