U.S. commercial P&C insurance rates flat in April

Share

U.S. commercial property and casualty (P&C) rates remained flat in April, ensuring prices as measured by a composite rate index stayed the same in the month as in April 2014, according to MarketScout’s latest Insurance Market Barometer.

After flat commercial P&C rates in March signalled a slowdown from February’s 1% gain, MarketScout’s Chief Executive Officer (CEO), Richard Kerr warned that while a slight change, it could be a sign of what’s to come over the coming months.

And in light of the average flat rate movement experienced in April, Kerr echoed his thoughts on the downward trend impacting U.S. commercial P&C rates.

“The market continues to be trending downward over the last eight months, from October 2014 at plus 1.5 per cent to April 2015 at a zero per cent increase. It’s not dramatic but it is a trend,” explained Kerr.

By account size, jumbo (over $1 million) sized accounts experienced the biggest change with a 2% decline. While large ($250,001 – $1 million) sized accounts reported a 0% change, and medium ($25,001 – $250,000) and small (up to $25,000) sized accounts both experienced 1% rate increases.

Commenting on MarketScout’s report, financial services specialist’s, Keefe, Bruyette & Woods (KBW) said; “While rate changes haven’t yet turned negative, flattening rates fall below currently benign loss cost inflation, constraining future margin expansion projects.”

The chart below, from KBW using MarketScout data shows U.S. commercial P&C rate changes year-on-year, by quarter.

Average commercial insurance rate averages - Source: KBW Research, MarketScout

Average commercial insurance rate averages - Source: KBW Research, MarketScout

KBW continues to stress that rates will likely continue on a negative trend as ample capacity continues to flood the global insurance and reinsurance markets, exacerbated by heightened competition.

And as the re/insurance sector continues to react and adjust to the influx of capital, increased merger & acquisition (M&A) activity and a prolonged, benign large catastrophe loss period, U.S. commercial P&C rates will continue to feel the pressures.

Looking forward, Kerr advised; “Coastal property may experience some slight rate increases since we are on the cusp of the wind season. Rates on all other exposures should continue to be quite competitive.”

While KBW warned it expects “rate changes to turn modestly negative over the next few months. We’re pretty neutral on primary commercial insurers, as sustained underwriting margin improvement is unlikely with increases matching or trailing loss cost trends, especially if reserve development fades further.”

Also read:

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

U.S. commercial P&C soft market fears “simply overdone”: Bernstein.

Commercial P&C rates hint at underwriting discipline in February: MarketScout.

Commercial P&C rates flat in January, softening expected in 2015.

Commercial U.S. P&C insurance pricing turned negative in Q4 2014.

Flat commercial U.S. P&C insurance rates signal 2015 soft market.

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.

Read previous post:
USAA returns with $150m Residential Re 2015-1 multi-peril cat bond

U.S. military mutual insurer USAA is back in the catastrophe bond market again with a $150m Residential Reinsurance 2015 Ltd....

Close