Re/insurance broker Willis released its 2016 Q4 survey results for U.S. commercial insurance recently, showing a tough market space for reinsurers as prices continue to flatten, although auto insurance provided the exception with continued pricing growth despite a saturated market.
The Commercial Lines Insurance Pricing Survey (CLIPS), compared commercial lines prices from the final quarter of 2016 with prices from the same time last year.
Results showed modest price decreases in workers compensation and commercial property lines, while directors and officers data were subject to more dramatic rate declines.
Commenting on the sector’s flattening rates, Alejandra Nolibos, Director, Willis Towers Watson’s Americas Property & Casualty Insurance practice, said for many lines the pricing decrease was ‘benign’; the survey showed industry rates hadn’t changed demonstrably compared with 2016 Q3.
The stand-out line of business that witnessed a significant price increase was commercial auto, which has continued its trend of steady pricing growth over the last couple of years.
Nolibos commented on the survey results; “The rapid growth in the rate of price increases seen in 2012 has since slowed for much of the commercial market, but not for commercial auto.
“This line’s cumulative price increase since 2012 is over 25%, compared to about 10% for the surveyed commercial market as a whole.
“The dynamics of the auto business are changing quickly and dramatically, ultimately driving challenging results and rate need for the line.”
Major U.S. auto insurer Travelers reported steady profit declines last year after weather-related costs and dragging investment income impacted revenue; the auto industry has raised its prices in order to cope with heavy losses.
However, as the Willis report demonstrates, it’s tough going for most U.S. commercial insurers and reinsurers who are left to negotiate withering profits amidst pricing declines.
And as reinsurers write more commercial insurance business directly in response to market pressures, competition in the sector is forecasted to grow, placing further pressure on the downwards pricing trend.
Should commercial pricing continue to drop, and at a faster rate compared with previous years, insurers could take advantage of the saturated market by pushing for further price reductions on their reinsurance protection, ultimately continuing the trend of added pressure on reinsurance pricing.
