The US insurance industry is "distressed and confused" according to a recent survey by the Council of Insurance Agents and Brokers (CIAB).

But this may be to the benefit of Bermuda however, says a local broker with Aon Insurance Managers (Bermuda) Ltd.

The CIAB report says continuing market uncertainty following the September 11 attacks is pushing already-rising commercial insurance rates even higher.

The survey asked 140 of the largest commercial insurance brokers in the US both specific and open-ended questions regarding the market in the post-September 11 environment, with their responses indicating emerging disruption and dislocation.

The findings were that rate increases continued through the fourth quarter with most significant hikes in the midsize and large accounts with buyers in general getting less coverage at higher prices.

Brokers reported more exclusions in general with scarce terrorism coverage, and where it was available, the limits were so low and the prices so high, many businesses are simply choosing to go without.

President of the CIAB Ken Crerar said in the report: "This is not a crisis situation yet, but the uncertainty and confusion our members find when trying to place certain lines are sure to contribute to an overall unsettled business environment."

And he added that it was too early to tell whether this disruption was a short-term response to the events of September 11 or a more permanent market condition.

However, Rob Hedges of Aon Insurance Managers (Bermuda) Ltd. said that not all classes of coverage were experiencing price increases, but rather it depended on the specific nature of business.

He said Bermuda was enjoying more business coming to the Island due to changes in the US domestic market and the new companies set up on the Island following September 11, which have helped raise awareness that Bermuda was the place to do business.

Mr. Hedges the biggest change in rates was in areas such as workers' compensation, E&O, D&O and specialty lines.

He said: "There has been a significant flow of business to Bermuda, as Bermuda has historically been a player in specialty risk." Mr. Hedges also said that it had been a client's market for the last few years, but this year had been a reality check as "they (clients) couldn't get the same thing done at the price they think is appropriate".

He also said that Bermuda companies had been responsive to the situation as they were "keen to look at new opportunities, especially if they were at better prices or had better terms and conditions".

He also pointed to the strong balance sheets of the new companies on the Island, saying the major carriers did not have a problem with capacity.

"Currently, the market would be viewed positively by the Bermuda companies," he said. As far as the US domestic market, the CIAB report pointed to the difficulty in placing and calculating risk, which was significant as it included the period leading up to January 1, when about 70 percent of the reinsurance treaties expired and were up for renewal.

Brokers responding to the survey reported that insurance rates for small accounts ($25,000 or less in commission and fees) climbed on average ten percent to 30 percent since last year, while nearly half of the brokers said rates for medium and large accounts (medium $25,000 to $100,000, and large, more than $100,000 in fees and commissions) increased between 30 percent and 50 percent. The report also notes that prices dramatically increased by line, with commercial property and umbrella rates leading the way with increases of up to 100 percent. It added that no accounts were being spared the hikes. Brokers told the CIAB that some of the biggest rate hikes and most difficult commercial underwriting challenges were in the New York and Washington DC markets, due to the threat of terrorism.

Other brokers cast the net wider to include many high-profile structures or commercial properties across the country that have large concentrations of visitors, workers or occupants.

One broker reported to the CIAB that there had been 100 to 200 percent increases for large New York City properties.

The CIAB report went on to say that even where rate increases were lower, brokers reported policy terms and conditions had been toughened, deductibles were substantially higher, exclusions from mould to terrorism were common, and limits on overall liability in umbrella policies had been capped at much lower levels.

Often, blanket property coverage was no longer available as underwriters tended to weigh the risk on each exposure individually and price it accordingly, said the report.

The report also said that brokers across the US were coping with availability problems by turning to the alternative marketplace for coverage, and the excess/surplus lines market had seen a surge in business, particularly for umbrella and property risks. Rates and forms were not regulated in the excess/surplus market so carriers were generally able to price coverage and set conditions to their liking.

Mr. Crerar concluded: "The market is clearly struggling. The combination of liabilities from September 11, Enron, and the big hit on state guaranty funds from the reliance insolvency has the industry reeling. Congressional action on terrorism insurance would help stabilise the market, but we don't expect to see a downturn in the market for a long time."