Commercial insurance premiums at risk of rising, expert warns

Jessica Perry//July 6, 2011

Business owners could see their property and casualty insurance costs rise as a result of recent natural disasters, according to industry sources.

Tornados in the Midwest and flooding in Georgia helped fuel a 29.3 percent plunge in first-quarter profits at U.S. property and casualty insurers, to $9 billion, according to a report by A.M. Best Co. Inc., in the Oldwick section of Tewksbury.

“Those results could put upward pressure on property and casualty premiums,” which have been relatively soft for an extended period of time, said Deana Lykins, president of the Insurance Council of New Jersey, in Ewing. “Nationally, we’ve seen weather-related disasters, and locally, New Jersey’s high auto insurance costs continue to put pressure on insurers.”

Additionally, recent disaster-mapping surveys, which insurance companies consult as part of the rate-setting process, indicate the entire state is at risk of flooding or other catastrophes, Lykins added.

“But at this point, it’s still only a possibility,” she said. “So far, we haven’t seen a rise in premiums.”

A Willis of New Jersey executive vice president said he’s seen some activity that could point to firmer prices, though.

“The profit picture is much worse in the reinsurance market,” said Morristown-based Jack Jennings, referring to insurance that insurance companies take out to reduce their exposure to risk. “The reinsurance market is often seen as a bellwether of the market, and the situation there suggests that prices could get a bit firmer.”

But it’s not a foregone conclusion, he added.

“At the beginning of July, almost all the carriers we deal with tried to push through rate increases,” Jennings said. “But we were able to resist them, and basically kept the premiums flat. There are many retail insurers out there so the competition may continue to contain any rise in rates.”