The latest Insurance Market Barometer from MarketScout reveals U.S. commercial property and casualty (P&C) rates were flat in March, on track with the trend seen in December and January, ensuring a slowdown from February’s 1% gain.
“While a small change from February, the downward adjustment rates may be an indicator of what is to come for next six months,” advised MarketScout Chief Executive Officer (CEO), Richard Kerr.
MarketScout’s most recent Barometer breaks down the P&C insurance rate adjustments by account size for March, showing that small (up to $25,000) and medium ($25,001 – $250,000) sized accounts increased by 1%. While large ($250,001 – $1 million) and jumbo (over $1 million) sized accounts reported a 0% increase.
Commenting on MarketScout’s report, analysts at financial services specialists Keefe, Bruyette & Woods (KBW), said; “Overall rate increase momentum has been in the 0-3% range since December 2013. We expect rates to go modestly negative in coming months as the industry adjusts to significant excess capital.”
The chart below, provided by MarketScout and KBW shows U.S. commercial P&C rate changes year-on-year, revealing a 3% dip for March.
“We believe that this underlying cycle effectively predicts near-term pricing behaviour,” advised KBW.
Kerr warned in MarketScout’s previous U.S. commercial P&C Barometer report that February’s 1% increase shouldn’t be viewed as a turn in market conditions, as intense competition and ample capacity in the global reinsurance space continues to impact the P&C market.
The coming months are sure to be telling for the U.S. commercial P&C market as the insurance and reinsurance industry continues to evolve and adapt to the trend of increased alternative capital, merger and acquisition (M&A) activity and intense competition.
Ensuring that the outlook for many, including KBW, is to “expect rate deceleration over the next few months.”
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.