Reversing the trend of falling average TCOR per $1,000 of revenue seen from 2013 to 2017, average TCOR rose from $9.75 per $1,000 of revenue in 2017 to $9.95 in 2018. The marginal increase in TCOR was driven primarily by slightly higher liability, property, and workers compensation costs.
Liability costs, the largest component of TCOR, increased by nearly two percent, while total property costs, the second largest component, was up five percent. Workers compensation costs, the third largest component of TCOR, also rose three percent from $2.64 to $2.72 per $1,000 of revenue. Higher risk management department costs also pulled average TCOR slightly upward.
The key findings of the 2019 RIMS Benchmark Survey are:
- The P/C industry had a profitable 2018;
- TCOR was higher in 2018, largely due to rising insurance rates;
- For casualty lines, higher TCOR is in part a response to a higher frequency of very large losses;
- Property TCOR rose despite a significant decrease in catastrophe losses in 2018;
- Cyber insurance remains a major success story for insurers as it continues to grow faster than the overall P&C market.
David Bradford, Chief Strategy Officer and Director of Strategic Partnership Development of Advisen Ltd. commented: “The P/C insurance industry is well-capitalized, growing, and profitable. While some classes of business experienced rate increases, the robust health of the P/C industry helped to keep rate hikes in most lines – and therefore increases in TCOR – in check. Some insurers are trimming capacity in troubled lines, but overall the P/C industry is very well-capitalized and able to assume more risk on its balance sheet.” He added that “the strong capital position, combined with overall positive results once investment income is taken into consideration, creates an environment where rate increases may be in conflict with a desire to remain competitive and to increase writings to put excess capacity to work.”
“An effective risk financing program does much more than just protect assets,” said RIMS Vice President Steve Pottle. “Understanding Total Cost of Risk (TCOR) allows organizations and their risk management professionals to successfully allocate resources and more accurately prepare for fluctuations in the insurance market. The ability to benchmark your organization’s risk program against your peers through TCOR is a valuable tool both to your senior management and when marketing your risk at renewal time. The RIMS Benchmark Survey continues to be a valuable resource used by hundreds of organizations, helping them to develop dynamic and highly-relevant risk financing strategies.”
The annual RIMS survey, produced with Advisen Ltd., is a single source of benchmark statistics with industry data for thousands of insurance programs from hundreds of organizations – including the programs of hundreds of Fortune 500 companies.
The 2019 RIMS Benchmark Survey provides a unique window into a market in transition. Seen against the backdrop of industry economic data, changes in TCOR offer insights into the forces at work in the insurance industry. Armed with this information, insurance buyers are better positioned to design their risk financing programs, budget insurance costs, report more effectively to senior management and negotiate with carriers.
To order a copy of the 2019 RIMS Benchmark Survey, visit https://www.rims.org/resources/benchmark-survey.
About Advisen
Advisen is the leading provider of data, media, and technology solutions for the commercial property and casualty insurance market. Advisen’s proprietary data sets and applications focus on large, specialty risks. Through Web Connectivity Ltd., Advisen provides messaging services, business consulting, and technical solutions to streamline and automate insurance transactions. Advisen connects a community of more than 200,000 professionals through daily newsletters, conferences, and webinars. The company was founded in 2000 and is headquartered in New York City, with offices in the US and the UK. Visit www.advisenltd.com to learn more.