MarketScout: Commercial Rate Increases Hold Steady

The composite rate for U.S. commercial lines – commercial property, casualty and professional lines coverage – 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 workers’ compensation were up 4 percent.

MarketScout CEO Richard Kerr said the market for workers’ compensation is ‘bumpy’ as insurers try to settle in at appropriate pricing:

We did record rate moderation for workers’ 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 ‘main street’ workers’ 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 Society’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 – 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 ‘tight,’ meaning reinsurance costs are rising and there is a shortage of reinsurance capital.

– Finally, the industry must show renewed underwriting and pricing discipline.

More on this story from the CAS here and  as reported by Insurance Journal  here.

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