But another observer says diminished capacity is starting to make a pricing difference.
“From my perspective, we see a leveling
off in insurance rates,” says Eric Zimmerman, head of engineering lines for the
insurer Zurich North America. “Capacity is
starting to be managed.”
IMPACT OF RMS VERSION 11.0
One issue brokers are anxious about is
how the new RMS Version 11 catastrophe model will affect rates in the future. The model is increasing the dollar
amount of catastrophe risk to which a
carrier’s books are exposed. The result,
for some, is either an increase in catas-trophe-exposure rates or carriers moving
to reduce their overall exposure.
“RMS V. 11 has created a lot of stirring
in the marketplace,” says Brimer, noting that companies that have used it in
their calculation of catastrophe risk have
E The builders’ risk market remains soft
and pricing competitive with too much
capacity chasing too little business.
However, there are signs some pricing
stability is coming to the market.
E Placements in catastrophe-risk areas,
primarily flood and earthquake zones,
have a tough time and need to go
through the excess-and-surplus lines
E Terms and conditions remains one area
carriers can work to differentiate them-
selves and buyers can get coverage that
fits their needs.
increased their prices by as much as 60
percent in some cases.
John Tutera, senior vice president-con-struction for the insurer Hiscox USA, says
some insurers are addressing the issue by increasing deductibles. Others are cutting their
exposure because they worry it could affect
their ratings if they do not increase their
capital reserve in response to the model.
Farbman says that RMS V. 11 could
mean expansion of the Tier 1 territory
(most-wind-exposed risks) by some carriers
if the adopt the revision—which would
affect the risks his firm focuses on in Long
Island, N. Y., southern New Jersey and parts
of Connecticut. NU
August 15, 2011 | National Underwriter Property & Casualty | 23