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Total cost of risk jumps five percent: RIMS Benchmark Survey

According to the newly released 2013 RIMS Benchmark Survey, the average total cost of risk (TCOR) increased in 2012, climbing five percent as opposed to its increase of only 1.7 percent in 2011. The change was driven largely by firming market conditions. The annual RIMS survey, produced with Advisen Ltd, is a single source of benchmark statistics with industry data for more than 52,000 insurance programs from almost 1,500 organizations.

Key findings of the 2013 RIMS Benchmark Survey included:

  • Average TCOR for all companies increased from $10.19 per $1,000 of revenue to $10.70 per $1,000 of revenue – the result of hard market conditions.
  • A review of Advisen’s umbrella / excess pricing and limit data showed that pricing influences excess insurance program limit buying trends. When prices were dropping, insurance buyers tended to increase their limits more. On the other hand, when prices were increasing, they tended to increase their limits less.
  • The contribution of property premiums to average TCOR grew nearly six percent, from $2.92 per $1,000 of revenue to $3.09 per $1,000 of revenue.

“While 2012 experienced a reduction in insured catastrophe losses, insurers continued to implement rate increases through the year” said Jim Blinn, executive vice president of Advisen’s Information and Analytics unit and executive editor of the Survey. “Continued pressure on underwriting results and a low interest rate environment motivated underwriting management to seek these higher rates.”

“Rates are rising, but our research shows that improving rates attract new capacity, which makes it difficult to sustain the trend towards progressively higher rates,” said RIMS Board director Michael D. Phillipus, ARM. “The wealth of information available in the RIMS Benchmark Survey arms risk practitioners with powerful industry insight that can help shape their understanding of the market and allow them to fulfill their responsibilities with greater confidence and clarity.”

The 2013 RIMS Benchmark Survey is available for purchase at www.RIMS.org/book

•Date: 16th July 2013 • USWorld •Type: Article • Topic: Enterprise risk management

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