Softening causes 2.3% commercial P&C rate decline in Q1: KBW, CIAB

Commercial property and casualty (P&C) rates during the first-quarter of 2015 declined by an average of 2.3% as a lack of catastrophe losses and ample reinsurance capacity continues to pressure markets, according to KBW analysts and the CIAB.

Financial services specialists Keefe, Bruyette & Woods (KBW) has produced a report on the commercial P&C rate environment during Q1 2015, using analysis from The Council of Insurance Agents and Brokers (CIAB) latest Commercial P/C Market Index Survey.

Ken A. Crerar, President and Chief Executive Officer of the CIAB said; “The trend of falling prices we saw in the fourth quarter of 2014, continued into the first quarter of this year.”

Artemis covered the CIAB and KBW’s reports on commercial P&C rates during Q4 of last year, a period that saw rates decline by an average of 0.7%, and the downward trend seems to be continuing.

The report states; “Not surprisingly, commercial property rates declined by 4% in 1Q15, the largest decline of any line, as significant excess reinsurance capital and a benign catastrophe environment outside the Northeast United States pressured primary pricing.”

The study continues to explain that ample third-party, or alternative capital in the property catastrophe sector is “likely indirectly pressuring other lines as well (including casualty), as traditional reinsurers redeploy their capital into less-pressured non-catastrophe lines, which ultimately adversely impacts those lines’ pricing as well.”

MarketScout’s latest Insurance Market Barometer showed that U.S. commercial P&C rates were flat in March, leading the organisation’s Chief Executive Officer (CEO), Richard Kerr to advise that; “While a small change from February, the downward adjustment rates may be an indicator of what is to come for next six months.”

Broken down by account size the KBW and CIAB reports note that large accounts ($250,001 – $1 million) witnessed the biggest rate declines, of 3.7%. Followed by medium size accounts ($25,001 – $250,000) at 2.7% and small accounts (up to $25,000) at 0.5%, for the first-quarter of 2015.

Analysts at KBW warned late last year that further softening in the global re/insurance sector was to be expected, with particular pressures from intense competition and ample capacity impacting the property catastrophe space.

And with forecasts revealing that conditions aren’t expected to change anytime soon, even after a large single loss, the resulting impacts of the challenging reinsurance market is sure to add further pressure on commercial U.S. P&C rates.