U.S. commercial P&C rate declines accelerate in October

After four consecutive months of rates in the U.S. commercial P&C sector declining by an average of 1%, October saw average rate reductions accelerate across the sector, falling by an average of 2% in the month, according to analysis from MarketScout and Keefe, Bruyette & Woods (KBW).

Matching last year’s price decline, year-on-year U.S. commercial P&C rates declined by an average of 2% in October, which was last seen in May of this year, bringing an end to the 1% average declines witnessed from June through September.

Richard Kerr, Chief Executive Officer (CEO) of MarketScout, said; “The composite rate includes all lines of commercial business. Insureds and brokers should carefully examine the rates for coverage and/or industry classifications that are germane to their placements.”

Pressures continue to build across the insurance and reinsurance sector, and an abundance of reinsurance capital from traditional and alternative sources continues to filter down into primary lines.

Kerr noted last month that the market appeared to be at a “standoff,” with insurers eager for rate increases, although MarketScout’s latest commercial insurance market barometer reveals further deterioration in October.

“Rate changes declined by about 1% for four months before October’s 2% decline, so this looks like some modest deterioration. Rate decreases also trail even benign loss cost inflation, so most insurers’ accident-year underwriting margins will almost certainly contract, depending on individual companies’ loss reserving conservatism,” said KBW.

By account size, small (up to $25,000), large ($250,001 – $1 million), and jumbo (over $1 million) sized accounts remained flat from the previous month, declining by an average of 1%, 1%, and 2%, respectively. Medium ($25,001 – $250,000) sized accounts declined by an average of 2% in October, compared with 1% in September.

MarketScout’s barometer also provides a breakdown of rate movements by coverage class, revealing that BOP, inland marine, umbrella/excess and workers’ compensation all saw rates decline by an average of 1% in the month.

While commercial property and general liability saw rates fall by an average of 2% during October, and business interruption, D&O liability, fiduciary and surety reported flat rate movements in the period.

Crime, EPLI, and commercial auto all saw rates improve in the month, by 1%, 1% and 2%, respectively.

With rates across the U.S. commercial P&C sector falling by an average of 2% in October, representing a negative shift from the recent trend of 1% declines, it will be interesting to watch rate movements in the coming months, with market headwinds set persist.

Also read:

– U.S. commercial P&C sector at a “standoff” – MarketScout’s Kerr.

– Another month of 1% average commercial P&C rate declines in August.

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