The average total cost of risk for companies rose for third straight year in 2013, analysis released Monday by the Risk & Insurance Management Society Inc. and Advisen Ltd. finds.
The 2014 RIMS Benchmark Survey said the TCOR for the 1,500 companies surveyed rose 2% in 2013 to $10.90 per $1,000 of revenue from $10.70 per $1,000 of revenue in 2012.
The report said the rising TCOR is part of a multiyear trend, noting that TCOR increased 5% in 2012 and 1.7% in 2011.
“The principal driver of higher average TCOR was average total premium and retained losses per $1,000 of revenue, which was $9.56 as compared to $9.37 in 2012,” the report said. “Within total premium and retained losses, the biggest contributors to the increase were property, management liability, workers compensation and professional liability, which grew 15%, 11%, 7% and 7%, respectively.”
Indeed, the contribution of property premiums to average TCOR was noteworthy, rising nearly 15%, from $3.09 per $1,000 of revenue to $3.54 per $1,000 of revenue, the report said.
However, the report notes that market conditions for buying insurance remain generally favorable in 2014 and the near future.
“The rate of increase is declining in a number of lines, and has reversed on average for property business. Capacity is more than adequate in most lines, and competition assures that policy terms and conditions are generally advantageous,” the report said.
One potential cause of uncertainty is the wrath of natural disasters, the report concluded.
“As always, the great unknown for the industry are catastrophe losses, which have the potential to cause disruption in the entire P&C market,” the report said. “However, at the current level of capitalization, it would likely take unprecedented losses to spark a sustained hard market.”