Insurance Rates have fallen for the 3rd straight time in 2009.   The trend towards rate moderation is continuing. Underwriters received a better net rate for each risk they wrote in March but their gross premiums probably decreased due to the impact of the current recession on almost all types of exposures, such as payrolls, gross receipts and property values. The moderation in rate reductions will yield more premiums but declining exposures will more than offset the improved rate.  Meeting premium growth projections will be a challenge in the current economic environment. In our view, it would be wise for insurers to restate top line premium projections and focus on managing profitability. Investors would be well advised to carefully monitor companies that do not adjust to the ongoing recession by changing forecasts to reflect the shrinking exposure base.  Attempting to make up for premium reductions driven by the downturn in the economy by simply writing more business is dangerous. We are still in a soft market, moderating, but still soft. Thus, writing new accounts to offset the loss of income from a reduced premium base may have a negative impact on the bottom line. 2009 is a time to carefully protect the balance sheet and wait to make an aggressive move when rates are actually headed up; which should be early 2010.

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Source: Market Scout