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Cost of risk declines in 2016

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Businesses saw a decline in the total cost of risk for the third year in a row, despite rising uncertainty and increasingly more complex risk profiles, says the 2017 RIMS Benchmark Survey.

The New York-based Risk & Insurance Management Society Inc. and New York-based Advisen Ltd., which produced the survey with RIMS, said in a statement Monday that the total cost of risk is defined as the cost of insurance plus the costs of the losses that are retained and the risk management department’s administrative costs.

Other key findings from the survey include:

• Technological advances have caused a seismic shift in the risk landscape, creating new types of claims and forcing insurers to consider new products and solutions for customers.

• Insurers ended 2016 with average capital and surplus at its highest level in 10 years, although excess capacity is undermining profitability.

• Predicted rate increases for cyber, errors and omissions and workers compensation lines did not materialize across the board, while property and most liability lines are expected to be flat to down 10% this year.

• Emerging trends this year include the technology revolution, security issues, natural catastrophes and political upheaval.

The benchmark survey includes industry data for more than 20,000 insurance policies from 759 organizations, 553 of whom contributed data in 2016, according to the statement.