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All eyes ahead A closer look at the 2016 insurance market forecast By Jeff Cavignac, James P. Schabarum II & Patrick Casinelli The industry had been fairly proftable and surplus was strong (see Table 1), so rates started to come down. From 2004 to 2011, rates actually dropped about 40 percent. When prices went down, combined ratios and profts began to deteriorate. Rates started to increase and, since 2011, average rates have gone up about 15 percent. Still, they remain 30 percent below what was charged in 2004 and the rate increases have begun to taper off. Allied Lines Allied lines refers to general lines of insurance that most companies need to purchase. This includes General Liability, Property, Inland Marine, Auto, Workers' Compensation and Umbrella coverages. If you're an average risk in a decent class, your rates should be fat. Executive Risk Executive Risk refers to Directors and Offcers Liability, Employment Practices Liability and Fiduciary coverage. This also can include Crime, Kidnap & Ransom and Cyber. Exec- utive Risk is more volatile than the Allied Lines. In addition, current pricing is affected by the last economic down turn. The poor results experienced by many businesses and the layoffs and RIFs (Reduction in Force) have increased loss ratios. Insurance companies tend to be reactive in their pricing and these poor results now are manifesting themselves in higher premiums. While it's diffcult to provide an average rate increase (10 percent to 25 percent is not uncommon), it also is misleading. Every account is different and individually underwritten. The key – start early on these renewals and go in to detail on why your frm is a good risk and should be credited accordingly. Professional Liability In general, Professional Liability lines are fat like the industry at large, but again, this varies by profession, specialty and account. For example, architects and engineers currently have more options than they have ever had. Every one of these policies is different and coverage varies greatly. In addition, the claims handling and risk control services offered also vary. Some insurers offer a policy (not a good one) with a subbed out (Third Party Administrator) claims department. This underscores the importance of dealing with a broker that specializes L ike many businesses, the insurance industry is cyclical. It is affected by a number of factors, including interest rates and investment returns, underwriting results and the general business cycle. The reason the insurance cycle is important to a business owner is because it directly impacts insurance premiums. 90 COMMERCIAL CONSTRUCTION & RENOVATION — MARCH : APRIL 2016