Insurance trends continued the decline in the first quarter of 2007, reflecting the abundance of capital and increased competition between carriers for business, according to the RIMS Benchmark Survey for the first quarter of 2007. Insurers continue to undercut each other in the directors and Officers (D&O) coverage. "D&O rates decreased 7.7% year over year in the current quarter, 5.1% year-over year in the fourth quarter of 2006 and 2.8% year-over-year in third quarter of 2006," says Dave Bradford, editor in chief of Advisen Ltd., which collects and analyzes RIMS data. "We're seeing an acceleration of a trend." Of course, the current rates remain significantly higher than they were at the start of the decade, before all the corporate scandals. Will D&O premiums fall to those low levels? "Anecdotally, beginning in March, we're starting to see the bottom fall out of the D&O market and rates are on a toboggan right down the hill," says Bradford, who adds that the insurance industry is awash in capacity and with companies reallocating surplus capital from the catastrophe exposed property business, some of that capital is ending up in the D&O pot. So supply is increasing rapidly. The other factor is that loss factor has improved dramatically. The number of securities class action suits claims against public companies has been slashed in half. "In 2006 there were fewer 114 or 118 class action suits as opposed to an average of 215 over the prior five years," says Bradford. "No one knows exactly why that is so but Sarbanes-Oxley might actually be doing what it was meant to do in improving transparency and corporate governance." Workers' compensation declined by 3.8%; and according to the survey, premiums will continue to fall. Also declining were general liability premiums, which have been on the decline for the past five quarters, although at 0.8%, the decline in the current quarter was a modest one.

In fact, the only area where premiums increased was property insurance, reflecting jitters among carriers and underwriters over the upcoming hurricane season, which some forecasters predict will be a severe one, following on the heels of last year's mild hurricane season. But Bradford believes that even here we may be at the end of that bump up in premiums. "We're more than a full year past the first anniversary of Katrina and the rise in natural catastrophe premiums. And we're getting anecdotal information that even in the catastrophe area, pricing is starting to come down," says Bradford. "All signs are that this is a light year for natural catastrophes and we're going to see these trends [of lower insurance premiums] pick up over the course of a year."