U.S. commercial property and casualty (P&C) rates increased by 1% in February compared to a flat January, which MarketScout believes may hint at disciplined underwriting from firms that are resisting under-priced business.
This is according to the latest monthly Market Barometer from MarketScout, which states “the composite rate in 2015 for all property and casualty lines across all states was up 1% in February as compared to flat in January.”
The report notes that small accounts (up to $25,000) increased by 2% during February, medium ($25,001 – $250,000) and large accounts ($250,001 – $1 million) rose by 1%, while jumbo accounts (over $1 million) remained flat for the period.
Richard Kerr, Chief Executive Officer (CEO) of MarketScout commented; “February is normally a low volume premium month so we would caution about putting too much credibility in these metrics.
“However, historically once the insurance market starts softening it normally accelerates rather than moderates or turns around.”
Rather than attributing the slightly improved commercial P&C rates to a change in market conditions, Kerr explained that big data, advanced modelling software and enhanced underwriting astuteness are the reasons for the change.
All of which results “in insurers simply being too smart to fall for extended and deep price cuts,” confirmed Kerr.
Despite the scepticism, which might well be warranted, a rate increase is an improvement and certainly more promising than further rate declines for U.S. primary insurers.
However the fact that large account rates remained flat shows that pressure is likely to remain throughout 2015 on the areas of U.S. P&C that are most exposed to the pressures which beset the P&C reinsurance market at this time.
But persistent competition within the global re/insurance market coupled with an abundance of alternative and traditional capital remains, the resulting impacts of which will continue to filter down, applying pressures to commercial P&C rates.
So perhaps the aberration from declining U.S. commercial P&C rates seen in recent months isn’t quite how it looks, as all the signs point to a market that continues to soften. The next few months may be telling.
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.