Primary insurers are operating in a competitive pricing environment with declining exposure bases putting their premium income under pressure. Particularly in the large to mid-size insured environment there is aggressive competition for new business that is preventing rate increases and in many instances resulting in rate decreases, especially if insureds have not obtained competitive bids in the last few years. In the small insured and personal lines business there is more stability and in some instances rate increases were warranted because of loss experience. The outlook for primary insurers in 2010 is for continued flat to 5 percent decreases in average rate due to a strong competitive environment, subject to remaining above minimum premiums or a substantial change in exposure bases.
Where business was written on a quota share basis, primarily in the facultative market for the larger insurers, rates dropped an average of 4 percent and exposures typically dropped between 4 percent and 8 percent. Eighty percent of insurer market pricing was either flat or reduced and continues to be lower than reinsurance model-driven pricing.
Treaty excess of loss business demonstrated less softness with 50 percent of treaties bound being flat and 21 percent of treaties bound experiencing reduced rates. Typical excess rate movements ranged from a 6.5 percent decrease to a 10 percent increase, with average rates flat and capacity generally available.