U.S. commercial P&C rates up by an average of 2% in Q4: MarketScout

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Commercial insurance rates were up in the fourth quarter of 2018

Reinsurance News | January 8, 2018

Luke Gallin

Analysis from MarketScout reveals that U.S. commercial property and casualty (P&C) insurance rates increased by an average of 2% in the fourth-quarter of 2017, compared with a 1% increase in the previous quarter and a 1.3% decline in Q4 2016.

After the devastating impacts of third-quarter 2017 catastrophe events, underlined by hurricanes Harvey, Irma, and Maria, insurance and reinsurance market players were hopeful of rate increases after several years of a softened market state.

Richard Kerr, Chief Executive Officer (CEO) of MarketScout, commented; “Underwriters are rarely surprised by aggregate losses because they have so many pricing and modeling tools. Most insurers are assessing rate increases at a moderate pace. Automobile and transportation accounts incurred the largest rate increases at plus 5 percent over prior year pricing.

“Keep in mind, rates are calculated on a composite basis and represent exposures from businesses across the US. Insureds in catastrophe exposed areas incurred higher rates/premiums.”

When compared with the previous quarter, commercial property rates increased by an average of 3% in Q4, while commercial auto increased by an average of 5% in the quarter.

Business interruption, BOP, general liability, umbrella/excess, and EPLI all increased by an average of 2% in the quarter, while inland marine, professional liability, D&O liability, fiduciary, crime, and surety all increased by an average of 1%.

No coverage class remained flat in Q4 when compared with the previous quarter, and according to MarketScout’s data, workers’ compensation was the only coverage class to record a decline in Q4, by an average of 1%, when compared with the previous quarter.

Commenting on MarketScout’s latest commercial insurance market barometer, analysts at Keefe, Bruyette & Woods (KBW) have said that “stabilizing or improving y/y commercial lines pricing will similarly stabilize (and sometimes improve) most insurers’ accident year underwriting margins and translate into y/y EPS growth.”

MarketScout also provides a breakdown of Q4 commercial rate movements by account size, which shows that all account sizes recorded increases when compared with Q3. Small (up to $25,000) sized accounts, medium ($25,001 – $250,000) sized accounts and large ($250,001 – $1 million) sized accounts all increased by an average of 2% in the quarter, while jumbo (over $1 million) sized accounts increased by an average of 1% in Q4.

For personal lines placements across the states, MarketScout reveals that the composite rate increase was 3%, compared with 2% in the third-quarter of 2017, with some catastrophe prone regions that experienced losses in Q3 seeing the steepest increases.

“We are seeing different rates in different geographical areas. Insureds with homes in catastrophe prone areas, particularly those who suffered losses in the 2017 wind season were hit with the highest rate increases. Some increases were as much as 15 percent,” said Kerr.

Fourth-quarter 2017 personal lines rates for homeowners under $1 million value increased by 4% when compared with the previous quarter, as did homeowners with a value over $1 million. Personal automobile lines increased by an average of 3% in Q4, while personal articles increased by 1% in Q4, when compared with the third-quarter of 2017.

As insurers and reinsurers try to make the most of the new market dynamics following the impacts of third and fourth-quarter 2017 catastrophe events, it will be interesting to see how both commercial and personal lines’ rates in the U.S. perform over the coming months.