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Total cost of risk up 5% in 2012: RIMS Benchmark Survey

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Total cost of risk up 5% in 2012: RIMS Benchmark Survey

The total cost of risk increased 5% in 2012, according to the Risk & Insurance Management Society Inc.'s 2013 RIMS Benchmark Survey.

Total cost of risk up 5% in 2012: RIMS Benchmark Survey

The 2012 increase in the total cost of risk is nearly triple the increase seen in 2011, when TCOR increased only 1.7% in the annual survey, produced by New York-based Advisen Ltd.

“What has been evident is buyers have enjoyed a very favorable environment relative to the cost of risk,” said Jim Blinn, executive vice president of Advisen's information and analytics unit and executive editor of the survey. “Last year that started to shift.”

While members of New York-based RIMS typically are large and sophisticated commercial insurance buyers, allowing them to “buffer” the rising cost of risk through measures such as increasing retentions, “It's become fairly evident and widespread in our analysis of 2012 data that buyers clearly were experiencing an environment of rising costs overall,” Mr. Blinn said.

The latest RIMS Benchmark Survey shows the 2012 average cost of risk for all companies at $10.70 per $1,000 of revenue, up from $10.19 per $1,000 of revenue in 2011. The portion attributable to property premiums increased 5.8% to $3.09 per $1,000 of revenue in 2012 from $2.92 per $1,000 of revenue in 2011.

“Property pricing is something that continues to be under pressure for buyers,” Mr. Blinn said. “It does kind of reflect the global environment and situation for property insurers,” he said. “There's still a need to recover a little bit.”

The 2013 survey is based on data from 1,459 participants. “It's a good cross section of what I'd like to call 'Business America,'” Mr. Blinn said. “The RIMS membership is really a good cross section.”

Participants receive the 2013 survey book for free. Others may purchase it here.