Will Hard Market Last Long?

Following over a decade of declines, the price for commercial lines insurance began to increase in 2000. Price increases accelerated with 2001 renewals. Following the horrendous losses to commercial lines insurers as a result of the events of Sept. 11, businesses are expecting even higher rates of increase in 2002. As opposed to prior hard markets, businesses in 2002 have a lot more options to manage exposures than through the pure transfer of risk by insurance. In considering these options, businesses need to assess when the current upturn in pricing will peak, and when pricing will return to rates that clients consider acceptable. As shown in Chart 1, prices for commercial lines insurance began to increase in 2000, following 12 years of decline.