Trucking Insurance Report- June 2009

Where are we today in trucking insurance and what is the current outlook?

Trucking insurance is a specialty line of insurance written with specialty insurance companies. The current outlook for specialty commercial insurance companies is mixed as general economic uncertainty, financial market turmoil and competitive market conditions are pressuring financial results and making the market turn more difficult to predict.

• Prices continue to decline, but have shown signs of stabilization; capital constraints are causing carriers to implement more disciplined underwriting to avoid business that does not meet profitability targets.

• The weak economic environment is reducing exposure bases and impacting demand for insurance, particularly in sectors that have been hit hardest by the downturn such as construction and transportation.

• Standard market carriers in search of premium growth continue to be a primary source of competition for business historically written in the E&S marketplace.

• Investment portfolio deterioration has reduced excess capital positions as credit spreads have yet to experience significant contraction.

Increasing reinsurance rates are expected to precede a turn in primary rates, creating margin erosion at primary carriers in the interim; capital-constrained insurers are turning to the reinsurance markets as one of the few available and viable sources of capital. We’ll see if that happens in trucking insurance soon.

Information on trucking insurance companies is both scant and hearsay. However, there has been specific company response made public. WR Berkley, one of GTU’s carriers through their Carolina Casualty subsidiary, sees declines in commercial transportation along with significant undercutting on prices for trucking insurance. National Interstate has mentioned that there are lower premiums due to fewer insured vehicles; moreover they also report low-single digit rate decreases for trucking insurance. There is a tendency for larger accounts to look for placement options outside of large struggling insurers. Baldwin & Lyons reports fleet transportation business as essentially flat from a pricing context.

What strategies have some of the carriers employed?

All companies are trying to grow in this tough marketplace while they say they want to maintain their underwriting discipline. Meadowbrook has chosen to expand it transportation footprint geographically. WR Berkley has formed new underwriting units- one of them being an Excess Transportation Facility through a new General Agent. Baldwin & Lyons acquired at the end of last year an insurance broker called Transportation Specialty Insurance Agency which provides service to owner-operators.

At GTU we see our companies and our agents the same way- everyone is trying to out select the competition without sacrificing underwriting integrity. In its present form, the marketplace constraints against growth and underwriting profit are not sustainable but when the marketplace will harden is anyone’s guess