Category Archives: Market Conditions

Commercial Insurance Rate Declines Continue

The soft market may be limited in length and severity, though that would be surprising, according to the latest analysis of commercial insurance pricing from online insurance exchange MarketScout.

The comments came as MarketScout reported that the composite rate for U.S. commercial property/casualty insurance declined by 2 percent in April, compared to a 3 percent decline in March and minus 4 percent in January and February 2016.

Richard Kerr, CEO of MarketScout observed:

“It seems we may have a reversal of sentiment. Rates are moderating. We are only seven months into a soft market that has so far yielded a maximum composite rate decrease of minus 4 percent.”

Kerr also noted:

“A limited soft market would be a bit surprising noting the current ample market capacity; however, more sophisticated underwriting tools seem to be limiting market swings.”

Rates changed in most coverage classifications with property, business interruption, BOP, inland marine, workers’ compensation, general liability, and fiduciary all moderating by 1 percent as compared to March.

Umbrella, auto, D&O, EPLI, crime, professional and surety were unchanged, according to MarketScout.

By account size, rates for small accounts (under $25,000) were down 1 percent from March to April. All other account sizes were down 2 percent in April 2016, compared to minus 4 percent in March 2016.

By coverage classification, transportation accounts adjusted more than any other industry classification from minus 4 percent in March 2016 to minus 2 percent in April 2016. Manufacturing, habitational, public entity and energy accounts all moderated 1 percent in April, while contracting and service accounts remained unchanged.

Here’s the visual by coverage classification:

Screen Shot 2016-05-11 at 10.43.28 AM

Check out this post over at Artemis blog for more on why the moderation in commercial insurance rates is unlikely to persist.

The Insurance Information Institute has further information with financial results and commentary on the p/c insurance industry here.

P/C Rates: Trending Down, But Not As Steeply

Broker Willis Towers Watson has updated its commercial insurance rate predictions for 2016, and says that price declines are slowing.

A complex commercial insurance marketplace—marked by increased underwriting scrutiny and potential challenges stemming from the changing carrier landscape—is raising the likelihood that companies will experience some price increases in various lines.

Back in October 2015, Willis said 10 lines of insurance could expect decreases and just five lines of insurance could expect increases in 2016.

Now the updated outlook for 2016 is that nine lines of insurance are expecting decreases and eight lines of insurance—auto, cyber, employee benefits, employment practices liability, errors & omissions, fidelity, kidnap & ransom, and trade credit— are expecting increases.

And for lines where it anticipated the largest price hikes—cyber and errors & omissions—those price hikes are accelerating.

With hurricane season approaching, it’s worth noting that property remains among those lines expecting a decrease, but average rate reductions are slowing down.

Non-CAT accounts have enjoyed rate reductions for a longer period and carriers cannot afford to cut rates much further, Willis Towers Watson notes.

For cyber renewals, primary premium increases are 5 percent to 15 percent for most buyers and 15 percent to 30 percent for POS retailers and large health care companies with no losses—with additional increases on excess layers.

Willis Towers Watson notes that excess cyber losses have caused a few markets to stop writing large accounts and others to increase their premiums significantly in upper layers of $75+ million placements.

Despite the reduction in capacity by some carriers, available limits in the marketplace are approximately $350 million to $400 million.

Capital markets are also reviewing cyber to determine if they can provide additional relief.

Meanwhile, insurers are focused on employee training, handling of sensitive data, holistic security practices for outsourced data infrastructure, and internal reporting structure, according to Willis Towers Watson.

Commercial Insurance Barometer Shows Competitive Market

Commercial property/casualty insurance rates in the United States continued to register a decline  in February, but showed little movement across  sectors, according to online insurance exchange MarketScout.

The composite rate remains at minus 4 percent.

Richard Kerr, CEO of MarketScout noted that traditionally February has always been a slow insurance month, so the lack of activity in rates is not surprising.

By coverage classification, commercial property saw the largest decrease at  5 percent, while business interruption, inland marine and commercial auto were all priced more competitively in February as compared to January. The rates for other coverages remained steady.

Large and jumbo accounts were also down more in February, with large ($250,001 to $1 million) down from minus 4 percent in January 2016, to minus 5 percent in February 2016. Jumbo accounts (over $1 million), declined from minus 3 percent to minus 4 percent in the same period. All other account sizes matched the same composite rate from the prior month.

By industry classification, manufacturing had a significant rate decrease from minus 2 percent in January to minus 5 percent in February. Habitational was down another 1 percent in February for a total of minus 6 percent. All other industry rates remained the same as in January, MarketScout said.

Here’s the visual on the average P/C rate changes for 2016 compared to a year ago:




Commercial Insurance Market: Generally Favorable For Buyers

Ample capacity and continued competition are expected to continue to put near term downward pressure on insurance rates in major classes of commercial property/casualty business, according to Marsh.

However, industry developments including recent earnings announcements, senior management changes and re-underwriting at several companies bear watching, said Marsh in its just-released U.S. Insurance Market Report.

Marsh’s analysis put average rate decreases in the fourth quarter of 2015 at between 5 percent and 10 percent for non-catastrophe exposed risks and by between 5 percent and 15 percent for moderately catastrophe-exposed risks.

Likewise, U.S. public company directors and officers (D&O) insurance rates were on average flat to down 10 percent in the fourth quarter, while U.S. commercial general liability rates on average renewed at between 10 percent rate decreases and 5 percent increases.

Amid the rate decreases across most classes of business, cyber insurance bucked the trend.

Typical cyber rate increases in the first half of 2015 were 10 percent to 15 percent over the prior year.

However, the retail and healthcare sectors, which have seen some of the costliest data breach events, saw increases ranging from 45 percent to 55 percent and 15 percent to 25 percent, respectively.

Marsh noted that demand for cyber insurance rose in 2015–a trend expected to continue in 2016.

Despite the overall pattern of soft pricing, amid ample capacity, competition and relatively low catastrophe losses, Robert Bentley, president of Marsh’s U.S. and Canada division warned that now is not the time to be complacent:

Organizations need to stay abreast of the ever-changing marketplace and risk landscape, where new and emerging risks can quickly escalate if not properly managed.”

More information on the cyber insurance market can be found in the Insurance Information Institute  white paper Cyber Risks: Threat and Opportunities.

Latest on Commercial P/C Insurance Pricing in 2016

Two separate market surveys point to a continuing decline in commercial property/casualty insurance rates.

Online insurance exchange MarketScout reported that the composite rate for p/c  business placed in the United States declined by 4 percent in January 2016.

Richard Kerr, CEO of MarketScout, noted that commercial property rates dropped from minus 2 percent in December 2015 to minus 5 percent in January 2016.

Commercial property insurers are getting ready to scratch each other’s eyes out as they fight for market share. We see nothing to prevent commercial property rates from dropping further.”

Business interruption, BOPs, professional liability and D&O coverages were also more competitively priced in January 2016 versus December 2015, MarketScout said.

By account size, large and jumbo accounts (over $250,001) were assessed rates slightly higher in January 2016 than in the prior month–bucking the usual trend, while rates for small and medium sized accounts (all under $250,000) were more competitive.

Meanwhile, the Council of Insurance Agents & Brokers’ (The Council) fourth quarter Commercial P/C Market Index Survey showed that 2015 closed as it began–with continued decreases in commercial p/c rates.

All size accounts experienced decreases in the fourth quarter of 2015, consistent with the downward trend seen in the prior three quarters. Large accounts saw the biggest decrease at 3.7 percent, followed by medium-sized accounts at 3 percent, and small accounts at 1.5 percent, The Council said.

By line, the largest decreases were seen in commercial property, down 3.5 percent, and general liability, down 3.4 percent. Umbrella policy rates declined an average of 2.8 percent while workers compensation rates were down an average of 2.6 percent.

Ken A. Crerar, president/CEO of The Council noted:

This soft market presents both challenges and opportunities for brokers. Lower rates meant less revenue but as the economy improved, policyholders were seeking increased limits and additional lines of coverage. This gave our members a chance to be creative and provide added value to their clients beyond just negotiating lower rates.”

The Council will continue to monitor how trends and advancements like industry consolidation, the burgeoning cyber insurance market and the use of technology in modeling and underwriting impact rates and capacity in the insurance market in 2016.

Insurance Information Institute  commentary on the p/c industry financial results can be found here.

Fight for Market Share Continues: MarketScout

Online insurance exchange MarketScout just reported that the composite rate for U.S. commercial property/casualty insurance declined by 4 percent in December 2015.

No line of business tracked by MarketScout saw a rate increase compared to the same month the previous year.

Its analysis was accompanied by some interesting commentary on the market by Richard Kerr, MarketScout CEO.

It may seem like the insurance industry has already been in a prolonged soft market cycle, but we are actually only four months in, Kerr noted.

The market certainly feels like it has been soft for much longer, because rates bumped along at flat or plus 1 to 1.5 percent from July 2014 to September 2015. The technical trigger of a soft market occurs when the composite rate drops below par for three consecutive months.”


MarketScout has been tracking the U.S. p/c market since July 2001 and Kerr also made the point that the length and veracity of the market cycles seems to have become less volatile in the last five or six years.

As a result, the impact of hard or soft market in today’s environment may be 5 or 6 percent up or down, he said.

Can you imagine how we would act today in a market such as that of July 2002 when the composite rate was up 32 percent? Or in December 2007 when the composite rate was down 16 percent?”

Kerr observed that underwriters today have better tools to price their products and forecast losses. Further, the chances of a rogue underwriter or company are greatly reduced by the industries’ checks and balances, Kerr said.

In his words:

There may be less excitement but there are probably far fewer CEO heart attacks.”

MarketScout’s historical barometer shows a mean average rate increase of 30 percent in calendar year 2002 and a mean average decrease of 13 percent in calendar year 2007.

The current environment is relatively benign in relation to these volatile years, MarketScout observed.

I.I.I. provides commentary on the p/c insurance industry financial results here.


Broker Survey: Insurers Writing More For Less

Business interruption, commercial property, general liability, umbrella, and workers’ compensation were the lines brokers most often noted  had a decline in rates in the third quarter of 2015, according to the latest Commercial P/C Market Index Survey from the Council of Insurance Agents & Brokers.

Broker comments came as The Council survey found rates decreased across all lines by an average of 3.1 percent in the third quarter, compared with a 3.3 percent decline in the second quarter of 2015.

Large accounts saw the largest decreases at 4.1 percent, followed by medium-sized accounts at 3.8 percent, and small accounts at 1.4 percent.

The ongoing buyers’ market was consistent across most lines of business, The Council noted, with a few exceptions, including commercial auto and flood both of which saw a slight uptick in rates. Flood continued to be viewed as a troubled peril, brokers said.

Flood insurance rates increased, especially in the Southeast and Pacific Northwest regions, as rate increases, assessments and surcharges continued to be implemented by the National Flood Insurance Program (NFIP) and Write Your Own Carriers.

Ken Crerar, president and CEO of The Council observed that while rates seemed stable and competition plentiful, the brokerage industry is keeping an eye on many factors that may have an impact on insurance placements going forward.

We heard from our brokers about the growing cyber insurance market, consolidation in the industry, and attracting and retaining talent.

These are long-term, macro-level issues that have been percolating for years.”

Check out latest I.I.I. information on  industry financial results  here.

Bucking the Rating Trend

Broker Willis has just published its commercial insurance rate predictions for 2016.

What’s the outlook for insurance buyers?

Overall, the property/casualty insurance market continues to soften and Willis predicts further softening ahead, fueled by relatively benign losses and an oversupply of capacity from traditional and non-traditional sources.

For 2016, 10 lines of insurance–property, casualty, aviation, energy, health care professional, marine, political risks, surety, terrorism and trade credit–are expecting decreases.

In contrast, just five lines of insurance–cyber, employee benefits, errors & omissions (E&O), fidelity and kidnap & ransom–are expecting increases.

The main exception to the overall softening trend is in cyber and E&O insurance, Willis reports, where the growing threat of cyber intrusion and data theft is sending rates upward.

By how much?

For retailers with POS (point-of-sale) exposures and large health care companies, rate increases are up to an eye-opening 150 percent at renewal, with additional increases on excess layers.

In fact most buyers of cyber insurance are seeing primary premium increases of up to 15 percent, Willis says. For smaller organizations (with revenues less than $1 billion) lower premium increases are typical.

What about terms and conditions?

Willis observes that underwriting requirements continue to rise and cyber insurers are also increasing retentions, reducing capacity and exiting certain sectors.

Despite the reduction in capacity by some carriers, available limits in the cyber marketplace are around $350 million to $400 million.

Willis also predicts the marketplace for first-time buyers of cyber insurance (except for POS retailers and large healthcare organizations) will continue with relatively favorable terms, conditions and pricing.

Willis offers this single piece of advice to buyers of cyber insurance:

In approaching the markets, be ready to identify key investments in security and privacy protections over the past policy year that will help differentiate you from your peers.”

The I.I.I.’s new paper Cyber Risks: Threat and Opportunities sheds more light on the rapidly evolving market for cyber insurance.

CIAB: Commercial Insurance Prices Continue Decline

The percentage of businesses purchasing commercial insurance increased in the second quarter of 2015, according to the latest Commercial P/C Market Index survey from the Council of Insurance Agents & Brokers (CIAB).

An overwhelming 90 percent of brokers responding to the survey said that take-up rates had increased, in part as premium savings drove interest in new lines of coverage and/or higher limits.

Cyber liability continues to gain traction, brokers noted, and this trend is expected to continue as the cyber insurance market matures, new insurers, products and capacity come to market and as companies realize the true extent of their cyber exposure.

Broker comments came as The Council’s analysis shows that rates declined across all commercial lines in the second quarter, continuing the downward trend from the first three months of 2015.

Premium rates across all size accounts fell by an average of 3.3 percent compared with a 2.3 percent decrease in the first quarter of 2015.

Large accounts once again saw the steepest drop in prices of 5.2 percent, while medium sized accounts fell 3.5 percent and small accounts fell 1.3 percent.

Commercial property, general liability and workers’ compensation premiums were most frequently reported down across all regions, with a slight uptick in commercial auto.

Ken Crerar, president and CEO of The Council said:

As the soft market continues in 2015, carriers are competing for good risks and are willing to work with brokers on price and terms.”

Meanwhile, average flood insurance rates saw an uptick across all regions, most frequently in the Southeast and Southwest regions, the Council noted.

This increase is likely due to premium increases, assessments, and surcharges, mandated by both the Biggert Waters Act and the Homeowner Flood Insurance Affordability Act (HFIAA), which went into effect April 1.

Find out more about business insurance from the Insurance Information Institute (I.I.I.).

P/C Insurance Pricing Still Competitive, Says MarketScout

The average price of insurance for all U.S. businesses remained the same in April 2015 as it was in April 2014, according to the latest analysis from online insurance exchange MarketScout.

MarketScout CEO Richard Kerr noted that the market remained flat with a zero percent increase in April 2015, down from a 1.5 percent increase in October 2014, continuing the downward trend of the last eight months.

Kerr said:

It’s not dramatic but it is a trend. 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.”

By coverage classification, rates for business owners policies (BOP), professional liability and D&O coverages decreased in April 2015 by one percent as compared to March 2015, MarketScout reported.

However, commercial auto coverage actually saw a 2 percent increase, while rates for all other coverages remained the same.

By account size, rates remained the same for all except jumbo accounts (over $1 million in premium) which adjusted to a rate reduction of minus 2 percent in April 2015, compared with rates the previous month, MarketScout said.

I.I.I. provides commentary on the P/C insurance industry financial results here.