U.S. commercial P&C rate declines return to 1% in November

U.S. commercial P&C rates declined by an average of 1% in November, a deceleration from the -2% recorded in October as commercial insurers continue to marginally move rates, according to analysis from MarketScout and Keefe, Bruyette & Woods (KBW).

After declining by an average of 1% for four consecutive months, U.S. commercial P&C rates fell by an average of 2% in October. However, the composite rate again moderated in November, from -2% to -1%, explains MarketScout’s commercial insurance market barometer.

“The most notable coverage classification with an ongoing consistent rate increase is commercial auto at plus 3 percent. The commercial auto classification includes all types of commercial vehicles. Not surprisingly, the most notable industry classification with an ongoing consistent rate increase was transportation, also at plus 3 percent. The transportation classification includes trucking, hauling, buses, and most anything with wheels. Railroads and aviation are not included in the transportation class,” said Richard Kerr, Chief Executive Officer (CEO) of MarketScout.

As explained by Kerr, commercial auto lines were up by an average of 3% in the month, while crime, EPLI, D&O liability, professional liability, and BOP all increased by an average of 1%.

Business interruption, surety, and fiduciary all remained flat in November, with inland marine, umbrella/excess, and workers’ compensation falling by an average of 1% in the period. General liability lines declined by 2%, and the steepest decline was witnessed in commercial property, which declined by an average of 3% in November.

“Underwriters have long struggled with commercial auto, many writing the coverage only to capture the related casualty lines such as workers compensation, general liability, and excess. Many insurers consider commercial auto as a loss leader.

“Transportation accounts may well be one of the most penalized industry classifications if and when the next hard market arrives. Many smart insurers have lost their shirt in transportation. The recent exit of several insurers will inevitably create opportunities for new insurers willing to give transportation a try. Those exiting the trucking business do so with a parting quip of ‘good luck’ to the new insurers as they feel the class is simply too unpredictable to secure a consistent profitable loss ratio,” added Kerr.

Analysts at KBW also commented on U.S. commercial P&C rate movements in November, noting an increase from October’s 2% decline and also an improvement from the -3% recorded in the same period last year.

“Rate decreases trail even benign loss cost inflation, so most insurers’ accident-year underwriting margins will almost certainly contract, depending on each companies’ loss reserving conservatism,” advised KBW.

MarketScout’s barometer also provides a breakdown of rate movements by account size, which reveals that small (up to $25,000) size accounts were flat in the month, compared with a 1% decline in October. Medium ($25,001 – $250,000) sized accounts declined by 1% in the month, compared with -2% in October.

Large ($250,001 – $1 million) sized accounts and jumbo (over $1 million) sized accounts both declined by an average of 2% in November, compared with -1% and -2% in the previous month, respectively.

MarketScout also offers monthly updates on composite rate movements for personal lines, revealing that in November automobile rates stayed unchanged from the previous month at +2%. Personal articles lines remained flat in the month, with homeowners over $1 million value increasing by 1%.

In line with automobile rate movements, MarketScout reveals that homeowners under $1 million value increased by an average of 2% in November.

“There is incredible competition in the traditional homeowners sector so the rate increase was unexpected. Remember, rates vary month to month so you need to look at multi-month trends to get an accurate measurement on rate trends,” explained Kerr.

Also read:

– U.S. commercial P&C rate declines accelerate in October.

– Alternative capital evident in mid-market commercial risks: WTW.

– U.S. commercial P&C sector at a “standoff” – MarketScout’s Kerr.

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