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MANAGING YOUR RISK – JANUARY 2007

2007 Insurance Market Forecast

By Anthony Bevilacuqa

The insurance marketplace in 2006 is turning out to be much more consumer friendly than was anticipated at this time last year. Even though the depths of the hard market double digit rate increase years had already passed on during early 2005, there was still an air of trepidation about what to expect during 2006.

Rate reductions began to creep into the market during late 2005. The forecast for 2006 was a year of modest rate reductions in the 3% to 5% range. However, once the second quarter of 2006 hit, the marketplace began to dig deeper into rate reductions ranging from 5-10%. As 2006 drew to a close, it was not uncommon to find underwriters willing to offer deep discounts of 10-20% for certain types of business insurance accounts.

The forecast for 2007 bodes well for virtually all types of commercial insurance buyers. No insurance company executive will admit it, but a competitive market is upon them. The industry shows a relatively healthy profit. The prediction of a horrible hurricane season along the east coast (fortunately) never materialized, as the entire United States coastal region was spared any significant hurricane damage in 2006. Other forms of natural disasters fell within manageable loss levels.

It is not unreasonable to think underwriters will be willing to offer 10-20% discounts over 2006 rates for the right account. Coverage terms and conditions are also improving with each renewal.

Personal insurance is not as rosy a picture. The specter of a catastrophic hurricane striking the North Atlantic coast within the next couple years has many homeowner underwriters taking a very conservative approach with underwriting new accounts along the coast. Allstate, one of the largest homeowner insurers in the nation, has announced they will not accept any new business in New Jersey, regardless of location. This decision is in conjunction with their previously announced strategy to non-renew all business in Long Island New York, as well as no new business in Connecticut.

Auto insurance in New Jersey will be both promising but frustrating. One of the only positive outcomes of ex-governor McGreevey’s administration was auto insurance reform. The reforms opened the door to no less than five new insurance companies willing to write auto insurance again in our state. More choice means more competition which means lower rates. But buyers are still frustrated. New Jersey still has the most liberal No Fault system among all other No Fault states. Couple that fact with the most densely populated state and highest auto ownership rate per capita, and it will be difficult for auto insurance rates to change much from where they are now.

Anthony Bevilacqua, CPCU is President of Anthony & Company, an independent insurance agency with special insurance and risk management services tailored to the needs of the commercial and residential development community. You can reach Mr. Bevilacqua at (908) 806-8844 or email him at insure@anthonycompany.com.

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