Following continued market pressures, emphasised by increased competition and abundant capacity, commercial property and casualty (P&C) rates were flat in January 2015, according to MarketScout’s latest report.
The general views of MarketScout, analysts at Keefe, Bruyette & Woods and recent analysis from Marsh’s annual ‘US Insurance Market Report 2015,’ is that market softening is expected to follow trend and continue throughout 2015, ensuring pressures remain for commercial P&C rates.
MarketScout’s monthly average commercial P&C rate barometer reveals a 0% increase for the first month of 2015 compared with December last year.
The U.S.-based insurance exchange service notes “the only changes from December 2014 to January 2015 were in commercial property (up from flat to plus one per cent) and Employment Practices Liability Insurance (EPLI) (down from plus 2 per cent to plus 1 per cent).”
Richard Kerr, Chief Executive Officer (CEO) of MarketScout discussed the opening month’s rate movements, or lack of, saying; “There are differing views on how long and deep this pending soft market cycle may last; however, few insurers are projecting rate increases.”
Artemis reported in late January that according to data from the Council of Insurance Agents & Brokers’ (CIAB) latest ‘Commercial P&C Market Index Survey,’ rates had already turned negative in December 2014.
As MarketScout’s report notes, which is echoed by analysts at Keefe, Bruyette & Woods, rate deceleration is predicted to continue throughout the first-quarter of 2015 and into Q2.
“We’re pretty neutral on primary commercial insurers, as sustained underwriting margin improvement is unlikely with rate increases matching or trailing loss cost trends, especially if reserve development fades further,” explained MarketScout.
To couple the MarketScout analysts’ views on the market, Marsh’s annual US insurance report also draws on the continuing factors pushing down commercial P&C rates, including intensified competition and an abundance of capital, some of which is due to overspill from the reinsurance market.
So while some analysts have viewed the market as negative since the end of last year, and others feel it’s not quite there yet, all seem to share the opinion that rates are decelerating and the market is certainly continuing to soften, with more of the same to come.
As we’ve discussed previously at Artemis, and highlighted by the latest data on the commercial P&C market, the increased competition among re/insurers is clearly filtering down and applying pressures to commercial P&C rates.
And while the majority of reinsurers stated that the influx of alternative and traditional reinsurance capital is likely to remain in the market, during the recent January renewals season, the impact on U.S. commercial P&C insurers’ rates looks set to continue as capital must be put to work.
This situation was forecast by a number of parties, including broker Willis Group which said as long ago as 2013 that new & alternative insurance and reinsurance capital would pressure commercial insurance rates in 2014.