The latest Insurance Market Barometer from MarketScout and accompanying commentary from analysts at Keefe, Bruyette & Woods reveals U.S. commercial property and casualty insurance (P&C) rates remained flat in May.
MarketScout’s Chief Executive Officer (CEO), Richard Kerr commented on U.S. commercial P&C rate movements in May, saying; “A lot of business renewed in May 2015. Overall, rates largely continue in a holding pattern. It seems both insureds and insurers are content to move forward with little to no changes.”
“The only notable exception is transportation where the auto portion of these accounts is driving an average 2 percent increase,” noted Kerr.
The third month of flat P&C insurance rates running, May saw that market continue to be impacted by reinsurance industry trends, of excess capital, pressure from alternative reinsurance capacity sources, all of which pushes players to look to commercial property lines in particular.
Broken down by account size, MarketScout’s Barometer reveals the same rate movements for U.S. commercial P&C rates as in April, with the largest change witnessed occurring with jumbo (over $1 million) sized accounts, which showed a 2% decline.
Large ($250,001 – $1 million) sized accounts reported a 0% change, while medium ($25,001 – $250,000) and small (up to $25,000) sized accounts reported a 1% rate increase.
The chart below shows monthly commercial rate changes for the last 13 years, and KBW notes, “while rate changes haven’t yet turned negative, flattening rates fall below currently benign loss cost inflation, constraining future margin expansion prospects.”
Analysts at KBW commented that while rate changes have been “virtually flat” year-to-date in 2015, this is somewhat different from the 3% rate increase witnessed in the same period last year.
And, in line with their views throughout 2015, KBW expects “rates to turn modestly negative in the coming months as the industry adjusts to significant excess capital.”
An outlook shared by many re/insurance industry participants and experts, as the growing influx of third-party and traditional sources of reinsurance capital continues to filter down into primary lines and, coupled with a lack of major catastrophes the resulting pressures on U.S. commercial P&C rates is likely to persist.
Ensuring that any significant positive rate movement for the U.S. commercial P&C sector is unlikely to happen anytime soon.