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MANAGING YOUR RISK - JANUARY 2008

2008 Insurance Market Forecast
By Anthony Bevilacqua

2008 is shaping up to be a very challenging year in many, many ways. The Presidential election will take center stage in another couple months, but will fight for air time with a continuing housing slump and the sub-prime mortgage crisis.

On the positive side, the insurance market in 2007 began staging a major downward rate correction that is expected to continue into 2008 that will benefit businesses and individuals alike.

New workers compensation rates for New Jersey were just published for 2008 that resulted in an average overall premium level increase of about 3.7% over 2007 rates. Even though there is a rate increase, insurance underwriters are now beginning to offer rate credits up to as much as 10%. Plus, managed care program credits have begun to reappear that can add an additional 5% or 10% credit.

Commercial liability rates levels began a steady decline starting in mid 2006 that gain considerable momentum through 2007. As of November, commercial liability rate levels were off about 13% -15% over 2006 levels year on year. There is no end in sight predicated for 2008 where an additional 10%-20% rate reduction is expected overall. Commercial auto rates are following a parallel path.

Commercial property rates have also decreased in a similar pattern. The one exception involves coastal exposure properties. Insurers continue to shrink their exposure to catastrophic loss in coastal regions, including New Jersey, as they prepare for the ‘big one’. Aiding the decline in property rates has been a favorable congressional response to extending the federally backed Terrorism Insurance program for as long as seven years.

Homeowner insurance in New Jersey is experiencing both good and bad times. Most insurers now offer discounts ranging from 5%-20% if you “package” homeowner insurance with personal auto and other personal policies. Like commercial property, coastal residences are fighting to find stable markets and stable rates. Even though there have been no significant hurricanes making landfall anywhere within a United States coastal region within the past 20-22 months, insurers nationwide continue to shrink market share in these areas, particularly in the northeast and Florida districts were high property values are commonplace.

Once the scourge of insurance companies in New Jersey, personal auto insurance has now become one of the most sought after coverage. At least a dozen new insurers have entered the personal auto insurance landscape within the past two years, helping buyers find competitively priced coverage regardless of driving record or locale.

During the early part of the 21st century, insurance buyers were warned to hunker down and ride out the hard market storm. The insurance seas have calmed. It is time to re-emerge into the marketplace and strike an exceptional deal!

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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