Online Insurance exchange MarketScoutÃ‚ has warned that the current pricing environment may be the Ã¢â‚¬Ëœnew normalÃ¢â‚¬â„¢ and around for several more years.
The prognosis came as MarketScoutÃ¢â‚¬â„¢s latest analysis reveals the composite rate for U.S. property and casualty insurance in the U.S. was down four percent in October 2010, extending the slow and steady moderation trend that began in August 2009.
MarketScout noted that for the last 14 months rate reductions have been very tight, measuring from minus 5 percent to minus 3 percent.
Richard Kerr, founder and CEO of MarketScout observed:
Since February 2005, rates have been cut in all areas regardless of how the data is measured. It doesnÃ¢â‚¬â„¢t matter if you measure by line of coverage, industry group or the size of account; insureds have enjoyed a rate reduction every month with the exception of a month here and there for D&O coverage. Agents, brokers and insurers need to realize this pricing environment may be around for several more years.Ã¢â‚¬
So what would it take to increase rates?
A major catastrophe in excess of $100 billion or the lack of return capital providers are seeing in their U.S. insurance portfolios are factors that could impact the market, according to Kerr.
Also, investments in some startup companies have not gone as well as expected. As a result, fewer capital providers are willing to back startup insurers. Kerr explained: