Category Archives: Market Conditions

THE WEEK IN A MINUTE, 10/19/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:

The Week in a Minute, 10/13/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights:

The multiple wildfires raging this week in at least seven northern California counties have caused fatalities and widespread property damage.

Hurricane Nate made landfall as a Category 1 storm on the weekend of October 7-8 and generated storm surge-caused property damage and power outages in Louisiana, Mississippi, and Alabama.

The number of U.S. highway fatalities rose 5.6 percent in 2016 as compared to 2015, according to the National Highway Traffic Safety Administration (NHSTA).

Eye on commercial insurance prices

Despite ample capital and benign claim cost trends, insurers have held the line on trading profitability for volume, while still responding as needed to emerging trends, according to Willis Towers Watson.

Its most recent Commercial Lines Insurance Pricing Survey (CLIPS) shows that commercial insurance prices in the U.S. were nearly flat in the first quarter of 2017.

Price changes reported by carriers averaged less than 1 percent for the sixth consecutive quarter.

Four lines (workers compensation, commercial property, directors and officers, and surety) showed modest price decreases.

Commercial auto remains the outlier with meaningful price increases reported.

Verisk Web Seminars: Property/Casualty Industry Results 2016: Perspectives from ISO, PCI, and I.I.I.

On-demand Webinar

The property/casualty insurance industry is facing difficult times. Underwriting gains are becoming losses, premium growth is slowing, and investment yields are shrinking. On the other hand, the industry’s surplus is reaching record highs and some lines and market segments are showing signs of growth.

In this webinar, executive leaders from ISO, PCI and the I.I.I. discuss how the insurance industry performed in 2016, and explore some key challenges and opportunities facing insurers in the years to come.

Watch this webinar now.

Presentation Date
Monday, May 8, 2017

Speakers
Beth Fitzgerald
President, ISO Solutions

Robert Gordon
SVP, Policy Development & Research, Property Casualty Insurers Association of America

Sean Kevelighan
CEO, Insurance Information Institute

Demand For Commercial Insurance Up Slightly

Demand for commercial insurance continued to follow a slight upward trend in the first three months of 2017, according to the latest Council of Insurance Agents & Brokers’ Commercial P/C Market Survey.

A large number of brokers reported an increase in demand for cyber coverage as clients became more familiar with the product and more interested in purchasing stand-alone policies.

The majority of brokers, 68.5 percent, reported that demand for commercial insurance products stayed the same in the first quarter of 2017, compared to the fourth quarter of 2016.

Nearly 30 percent of broker responses saw an increase in demand, while only 2.2 percent saw a decrease.

As for pricing, the soft market continued in Q1 2017, with the average rate decline across all commercial P/C accounts at 2.5 percent, compared to 3.3 percent in Q4 2016.

This is the ninth straight quarter that commercial rates have declined across small, medium and large accounts, The Council said.

Additional I.I.I. facts and statistics on the commercial lines insurance market are available here.

Stable And Buyer-Friendly Commercial Insurance Marketplace

As hundreds of risk professionals gather in Philadelphia, the birthplace of insurance, for the annual RIMS (Risk and Insurance Management Society) conference, here’s the latest take on corporate risk costs:

  • Businesses saw a 5 percent decline in the total cost of risk (TCOR) in 2016—the third year in a row that corporates have benefited from lower prices, according to the latest RIMS benchmark survey. The study defines TCOR as the cost of insurance, plus the costs of the losses that are retained and the administrative costs of the risk management department. CFO.com has more on the findings.
  • The commercial insurance marketplace remains buyer-friendly and stable for North American insurance buyers, even as it braces for potential changes from Washington D.C. That’s the outlook from Willis Towers Watson in its 2017 Marketplace Realities report which points to the fluidity of capital as a key driver of current market conditions. The report’s line-by-line commercial insurance price predictions for the remainder of 2017 show a mix of increases, decreases and flat rates, as follows:

 

Commercial Insurance Prices Moving On Up

Insurers are moving away from the rate cuts of 2016, according to online insurance exchange MarketScout’s take on the first quarter 2017 rate environment.

For the first time in 20 months, the composite rate index for commercial accounts in the United States measured a rate increase at plus 1 percent, MarketScout said.

Richard Kerr, CEO of MarketScout:

“The plus 1 percent composite rate index was driven by larger rate increases in commercial auto, transportation, professional and D&O rates. We also recorded small rate increases in the majority of coverage and industry classifications.”

Rates for business interruption, inland marine, workers’ compensation, crime, and surety coverages held steady in the first quarter. Rates for all other coverages either moderated or increased.

By industry class, every industry experienced a move toward higher rates in the first quarter. Transportation had the largest rate increase at plus 5 percent, MarketScout reported.

Small accounts (up to $25,000) were assessed a 1 percent rate increase in the first quarter of 2017. Medium accounts ($25,001 – $250,000) were flat while both large ($250,001 – $1 million) and jumbo (over $1 million) accounts enjoyed rate decreases of minus 1 percent and minus 2 percent respectively.

Check out Insurance Information Institute facts and statistics on the commercial lines insurance market here.

Eye On Commercial Insurance Prices

Two broker surveys give insight on where U.S. commercial insurance prices are at.

Willis Towers Watson’s most recent Commercial Lines Pricing Survey (CLIPS) shows commercial insurance prices were again nearly flat during the fourth quarter of 2016:

As you can see above, price changes reported by carriers were less than 1 percent for the fifth consecutive quarter, following a moderating trend in price increases that began in the first quarter of 2013.

The outlier in the results? Commercial auto, where meaningful price increases continue to be reported. Price changes for most other lines fell in the low single digits, according to the CLIPS survey.

Meanwhile, the Marsh Global Insurance Market Index Q4 2016 found that U.S. composite insurance rates were down 3 percent in the fourth quarter of 2016, in line with the global rate:

Marsh said the continuing decline in U.S. commercial insurance prices was driven largely by decreases in property insurance pricing.

However, U.S. cyber liability rates continued to increase for the sixth consecutive quarter, albeit at a moderating rate, Marsh noted.

Cyber price increases don’t appear to be deterring businesses from buying this essential coverage.

The number of Marsh clients purchasing cyber insurance increased by 25 percent from 2015 to 2016 across all industries, with the greatest overall uptake in healthcare, communications, media and technology.

See more on the importance of cyber insurance to businesses in this Insurance Information Institute (I.I.I.) white paper.

Significant trends shaping the property/casualty insurance business are discussed in this I.I.I. presentation.

Looking Ahead: Commercial Insurance Pricing

Where are U.S. commercial insurance rates headed in the coming year?

Latest analysis from online insurance exchange MarketScout gives some insight.

This from Richard Kerr, CEO MarketScout:

“We expect more moderate rate reductions for the coming year for all but a few lines of business. If interest rates increase, rate reductions could accelerate.” 

December closed out the year at a composite rate reduction of 1 percent, according to MarketScout.

Employment practices liability insurance and crime were the only coverages with rate increases in December, with increases of 1 to 2 percent.

Workers’ compensation rates decreased from down 1 percent to down 2 percent in December. Commercial property rate decreases moderated from down 3 percent to down 2 percent.

The soft market is now 16 months old, but seems longer because the composite rate in 2015 was flat or plus 1 percent for the first eight months before dipping into negative territory.

Kerr noted that generally the soft or hard market cycles last at least three years.

Most industries are cyclical to some extent and the Insurance Information Institute offers further explanation of the property/casualty insurance market cycle here.

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.