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Commercial P&C rates down 3.9% in Q2, buyers market remains: CIAB


Analysis from the Council of Insurance Agents & Brokers (CIAB) highlights a continuation of the buyers market as commercial P&C rates declined by an average of 3.9% in Q2, across all account sizes.

“These results confirm everything we’ve heard from our members anecdotally this year. Carriers are aggressively pricing new business while attempting to hold rates steady on renewals. It’s a buyers’ market,” said Ken A. Crerar, President and Chief Executive Officer (CEO) of the CIAB.

Analysis from the CIAB reveals that on average, commercial P&C rates declined by 3.9% in Q2 2016, compared with 3.7% in the first-quarter and 3.3% during the same period last year.

When compared with Q2 2015, small sized accounts were down by an additional 0.8% at 2.1% in Q2 2016, while medium sized accounts declined by a further 0.7% to 4.2%, and large sized accounts fell by an additional 0.1%, to 5.3% in Q2 2016.

According to the CIAB, one Midwest broker noted that carrier underwriting practices in the second-quarter were seen to be “pricing to win.” Continuing to add that “many carriers offered reduced pricing to keep accounts out of market driven by concern that pushing the account out to market will likely result in the need to drop price considerably more in order to hold business.”

Artemis discussed the persistent rate declines in the commercial P&C sector earlier this month, as analysis from Keefe, Bruyette & Woods (KBW) and MarketScout noted a continuation of declines, stating that insurers are “tired of cutting rates.”

In fact, Artemis has reported on the commercial P&C rate environment for some time now, which, highlights a prolonged period of rate declines across all business classes and account sizes as the softness witnessed in the reinsurance market expanded.

One reason for the expansion of the softening has been increased capital and capacity being diverted towards commercial lines (property particularly), at a time when insurers in the sector have been well-capitalised and alternative reinsurance capital has sought to expand its remit as well.

According to the CIAB’s recent analysis on rate movements in the second-quarter, commercial property rates witnessed the steepest decline, at -6% in Q2. Workers’ compensation rates declined by 4.3% in the period, general liability by 3.6%, while business interruption fell by an average of 3% in Q2.

Employment practices and commercial auto actually increased in the second-quarter, by 0.8%, explains the CIAB.

“Demand for insurance products was strong, with 81% of respondents observing that demand had increased last quarter,” said the CIAB.

Pressures in the commercial P&C space have been exacerbated by the abundance of capacity in the global reinsurance market, where alternative and traditional capital continues to build competition and pressure rates and ultimately trickles down into primary lines.

With the majority of alternative reinsurance capital focusing on property catastrophe lines, it’s unsurprising that this business line continues to experience the steepest declines in the majority of quarters.

The supply demand imbalance has long been discussed as a key contributing factor to the softening marketplace, so it’s promising to hear that demand for insurance products increased in Q2, a trend that could result in greater demand for reinsurance.

“There is a lot going on in the world right now that could impact the market.

“The presidential election, terrorist attacks, daily cyber attacks and data breaches, devastating floods in West Virginia and Maryland, NCCI’s proposed 20 percent workers’ comp rate increase in Florida in response to a recent court ruling, the UK’s Brexit decision and Zika making landfall in the U.S. The Council and our members are keeping a close eye on all of them,” concluded Crerar.

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