The composite rate for U.S. commercial lines Ã¢â‚¬“ commercial property, casualty and professional lines coverage Ã¢â‚¬“ was up 4 percent in June 2012 compared to a year ago, according to the latest analysis from online insurance exchange MarketScout.
Commercial property coverage rates were up 5 percent, while BOP, general liability, commercial auto and workersÃ¢â‚¬â„¢ compensation were up 4 percent.
MarketScout CEO Richard Kerr said the market for workersÃ¢â‚¬â„¢ compensation is Ã¢â‚¬ËœbumpyÃ¢â‚¬â„¢ as insurers try to settle in at appropriate pricing:
We did record rate moderation for workersÃ¢â‚¬â„¢ compensation accounts from plus 5 percent in May to plus 4 percent in June…Accounts with class codes related to high hazard exposures are being assessed considerable rate increases of plus 7 percent to plus 15 percent. Traditional Ã¢â‚¬Ëœmain streetÃ¢â‚¬â„¢ workersÃ¢â‚¬â„¢ compensation accounts are renewing as expiring to plus 2 percent.”
We note that just a couple weeks ago, Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.) told a meeting of reinsurance actuaries that despite rates drifting upward in recent months, the property/casualty industry is unlikely to see a return to the traditional hard market this year or next.
Speaking at the Casualty Actuarial SocietyÃ¢â‚¬â„¢s (CAS) Seminar on Reinsurance, Hartwig said that four criteria have to be present for a truly hard market, one in which rates climb sharply Ã¢â‚¬“ in excess of 10 to 15 percent or more.
– First, the industry must endure a sustained period of large underwriting losses. Only when underwriting losses are large and sustained do insurers turn disciplined, Hartwig said.
– Second, the industry suffers a material decline in industry surplus or capacity. When surplus falls, rates rise as customers compete for access to the surplus.
– Third, the reinsurance market must be Ã¢â‚¬Ëœtight,Ã¢â‚¬â„¢ meaning reinsurance costs are rising and there is a shortage of reinsurance capital.
– Finally, the industry must show renewed underwriting and pricing discipline.