Analysts at KBW believe that commercial insurance lines pricing has been “close to peak levels” during the first quarter of 2021, with plateauing and very modest deceleration expected as the year continues.
This could entail slightly smaller rate increases that still remain above loss trends, KBW explained.
Analysts added that specialty commercial rate increases are likely to stay above standard commercial lines’ both during and beyond Q1, reflecting macro hard market factors such as low interest rates, elevated catastrophes, social inflation.
In personal lines, KBW expects that personal auto rate decreases will be sustained by strong underwriting profitability, regulatory pressure concerns, and the expectation of lower post-COVID normalized losses.
However, personal property rates should rise in response to rising reinsurance costs and persistent bad weather.
While 1/1 property reinsurance renewal rate increases fell slightly short of more optimistic expectations, KBW notes that casualty and specialty reinsurance lines’ rates, terms, and conditions all point to significantly improving expected reinsurance returns.
“The Japan-focused April 1 renewals effectively sustained 1/1 trends; we expect bigger rate increases during the Florida and southeastern U.S. focused mid-year renewals, reflecting 2020’s pressured Florida underwriting results,” analysts said.
KBW also believes that mid-year reinsurance pricing will be bolstered by Winter Storm Uri, which looks set to cause losses towards the mid-point of $10-18 billion loss estimates.
But abundant current and potential capital implies that mid-year reinsurance pricing will reflect expected return adequacy rather than capacity pressures, it added.
Persistent commercial P&C rate increases are also expected to support low- to mid-single-digit organic revenue growth for brokers, KBW said.
