New data from MarketScout shows that commercial property insurance rates increased by 9% over the fourth quarter of 2020.
Despite significant challenges over the year, the re/insurance industry continued to function efficiently, MarketScout noted, with the Q4 composite rate up 7.1%, and up 6.25% in Q3.
The biggest rate increases by line of coverage were for umbrella liability, professional lines and directors and officers liability. The only rate decreases from the third to the fourth quarter were for inland marine and crime coverages.
Rates also increased for all sizes of businesses and industries except for public entities and energy companies.
“Rate increases are continuing,” said Richard Kerr, CEO of MarketScout. “We believe the slight moderation in energy rates in the fourth quarter 2020 is an anomaly based on the considerable reduction in exposures in the oil and gas sector. Rates for public entities were also relatively modest.”
“Composite rates for property and casualty insurance have traded in a relatively tight corridor the last ten years as compared to the ten-year period of 2001 to 2010 when rate swings were considerably more volatile,” Kerr continued.
“Improved underwriting tools, catastrophe modeling and more thoughtful reinsurance placements have taken most of the severe peaks and valleys out of the market. Simply stated, underwriters are smarter than they were 15 years ago. The exceptional underwriting and technology tools help make for a more stable market.”
Turning to personal lines, the composite rate was 6.3% in the fourth quarter of 2020, according to MarketScout’s data, reflecting the market’s rate acceleration.
Notably, homeowners with properties valued over $1,000,000 paid average rate increases of 8.2%, signalling ongoing price increases for large homes.
“Rates are up modestly across all sectors of personal insurance with high net worth homeowners rates up the most,” Kerr went on.”
“Wealthy clients are buying more homes as an escape and if they are not buying something new, they are renovating the ones they already own. Homeowners lucky enough to own properties with the home replacement cost in excess of $1,000,000 have borne the brunt of most of the rate increases, especially in the fourth quarter 2020,” he explained.
“For those homeowners fortunate enough to own a beach or mountain home, increases are more severe. Homes in brush fire areas of California or hurricane prone sections of Florida, are assessed rate increases as high as 20 to 30 percent. The only way to offset big rate increases is to shop your insurance and limit coverage or raise deductibles.”
