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Composite rate for U.S. P&C placements up by 2.5% in Q3: MarketScout

17th October 2018 - Author: Luke Gallin

The composite rate for U.S. property and casualty (P&C) placements increased by an average of 2.5% in the third-quarter of 2018, in line with the rate increases witnessed in the second-quarter, according to MarketScout.

rate increasesAccording to Richard Kerr, Chief Executive Officer (CEO) of MarketScout, rates continued to move slowly upward with insurance companies taking a measured approach to price gains.

“However, transportation and commercial auto rates continue to be assessed with more aggressive rate increases. Both trucking and commercial auto risks were assessed rate increases of plus 6 percent. Clearly, insurers feel these exposures are tough and merit aggressive rate increases. Moreover, the market is accepting the increases because of the small number of insurers willing to write commercial auto and trucking risks,” said Kerr.

By coverage class, commercial property, general liability, and EPLI all increased by 3% in the quarter. For property, this represents a 1% decline from the second-quarter to the third-quarter, while for general liability it represents an increase of 2%.

Commercial auto lines increased by an average of 6% in the third-quarter, the highest increase of all coverage classes during the period.

BOP, inland marine, umbrella / excess, professional liability, and D&O liability all increased by 2% in the period. While business interruption, fiduciary, and crime were up by 1%. Surety lines remained flat in Q3, and the only coverage class to decrease remained workers’ compensation, which fell by an average of 3% during the third-quarter of 2018.

Breaking rate movements down by account size, and MarketScout reveals that small sized accounts (up to $25,000) increased by 3% in the quarter, as did medium sized accounts ($25,001 – $250,000). Both large sized accounts ($250,001 – $1 million) and jumbo sized accounts (over $1 million) increased by 2% in the period.

Analysts at Keefe, Bruyette & Woods (KBW) also commented on U.S. commercial insurance rate movements in the third-quarter of 2018, noting an expectation that improving year-on-year commercial lines pricing will stabilise, and actually improve, in certain cases, a number of commercial insurers’ accident year underwriting margins.

“We think most insurers will face lighter rate-related margin headwinds in 2018 and into 2019 as recent quarters’ rate trends earn in, although this should be partly offset by rising casualty lines’ loss trends,” said KBW.

MarketScout also provides insight into the third-quarter 2018 composite rate for personal lines in the U.S., showing that these held steady at an increase of 2%, when compared with the same period in 2017.

“It appears insurers may feel 2017 was a somewhat unusual year as respects to large cat losses. While rates are still trending upwards, there is no momentum for more aggressive rate increases at this time,” said Kerr.

According to MarketScout’s analysis, homeowners rates for homes under $1 million value increased by 3%, while homeowners rates for homes over $1 million value increased by 2% in Q3. Automobile lines increased by 3%, and personal articles increased by 1% in Q3 2018.

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