Johnston-based Factory Mutual Insurance Co., the
largest insurer of U.S. industrial property, will return $325
million to PepsiCo Inc., Johnson & Johnson, Boeing Co. and other
policyholders after claims produced fewer losses than expected.
The mutual insurer is owned by its clients and will distribute the rebate as a credit
against next year’s premium payments, the company said. The
payment comes after several years of lower-than-predicted
property losses.
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The credit is the latest sign that property insurance rates
may have gotten ahead of themselves after more than three years
of increases. Factory Mutual said the rebate ratifies its
strategy of employing 1,400 engineers to analyze and prevent
accidents instead of relying on statistical charts compiled by
actuaries.
“The majority of all losses are preventable,” said Factory
Mutual Chairman and Chief Executive Officer Shivan S.
Subramaniam.”And as a mutual company, when the losses are lower
than expected, our policyholders are the ones who benefit.”
Commercial property insurance rates have flattened this year
or declined as underwriting profits improved for most companies,
according to Aon Corp., the second-largest brokerage.
Factory Mutual, which uses the marketing name FM Global,
insures 36 percent of commercial properties with annual premiums
of more than $100,000, Subramaniam said. Rivals include American
International Group Inc., Zurich Financial Services AG and
Travelers Property Casualty Corp.
Years of price increases, which accelerated after the Sept.
11 terrorist attacks and followed a decade of price-cutting in
the 1990s, have contributed to a surge in insurance costs for
companies. Businesses today pay more than $7 for insurance out of
every $1,000 of revenue, the highest in almost a decade,
according to the Insurance Information Institute.
Clients of Factory Mutual also include Schering Plough
Corp., Texas Instruments Inc., Caterpillar Inc. and Kimberly-Clark Corp. Policyholders will receive a credit equal to between
6 percent and 15 percent this year’s premium.
The company’s earnings from operations more than doubled in
the first nine months of the year to $779 million.
Bloomberg News
