In 2013, organizations paid 2% more per $1,000 of revenue to cover their risks in major areas including property, liability, management liability and workers compensation. Buyers also saw an increase of 5% in 2012 and 1.7% in 2011, according to the “2014 RIMS Benchmark Survey.”
According to experts, these higher costs reflect the fact that global natural disasters and large settlements are becoming more regular and more expensive. Bobby Bowden, executive vice president and chief marketing officer for Allied World, said that the increase in total cost of risk has been driven by low interest rates, which have encouraged underwriting discipline, and improvements in modeling data, which have led to more pricing accuracy.
Michael Liebowitz, senior director of insurance and ERM for New York University, said that he relies less on brokers to market his program and instead meets directly with underwriters to manage rising costs. Steve Truono, vice president of global risk management for Starwood Hotels, said, “We will and do retain risks that are predictable, that are known and that we can get our arms around.”Bowden added that rates are currently moving downward. “I think we are at the end of the road of seeing the rate increases that we have over the last few years,” he said.