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Morgan Stanley forecasts slowdown in P&C rate growth

14th June 2021 - Author: Matt Sheehan

Analysts at Morgan Stanley are foreasting a deceleration in property and casualty (P&C) insurance rates as lines begin to approach pricing adequacy.

growth chartAt present, overall rate increases continue to remain positive and above loss trend, as evidenced by improvement in Q1 commercial lines margins.

But Morgan Stanley believes the evidence now points to an overall slowdown in the commercial pricing environment.

The results of the latest IVANS Index, for example, indicated positive pricing year-over-year for all lines of business (except WC) for the month of May ’21, but a deceleration in most lines as compared to last month.

And similarly, Willis Towers Watson’s Commercial Lines Insurance Pricing Survey (CLIPS) indicated pricing was up 8% YoY in Q1 2021, but down sequentially from 10% YoY in Q4 2020.

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CLIPS also noted increases in most lines, with the exception of Workers’ Compensation, which still remains negative but continued to temper a bit.

Morgan Stanley recommended careful attention to P&C insurers’ commercial margins going forward, with the possibility of some elevated loss trends.

Among the factors that could influence loss trends, analysts included inflation, re-opening of courts, impact of employment on Workers’ Compensation and normalized driving levels’ impacts on commercial auto books.

“With a lack of catalyst for any significant bottom-line expansion, we could see multiples stagnate or come down as some choose to take profits,” Morgan Stanley added.

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