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P&C rate increases to continue despite volatility: KBW

28th June 2018 - Author: Matt Sheehan

Commercial property and casualty (P&C) rate increases are likely to continue to increase despite monthly volatility in some lines, according to analysts at Keefe, Bruyette & Woods.

rate increasesKBW said that it “explicitly disagreed” with the proposition that current commercial rates increases are likely to fade, asserting that market hardening would unfold slowly as individual pricing decisions by underwriters and companies cause short-term unpredictability.

The company’s analysts acknowledged that there was legitimate cause for pessimism about pricing trends for profitable lines such as Workers and Compensation, but maintained that outlooks for most primary commercial lines were weak and would continue to push rates up.

KBW noted that there are already some clear signs of modestly improving commercial rates increases in most lines, and suggested that this trend could be accelerated if early signs of increasing loss cost inflation gain traction.

It also held that it was significant that commercial insurance price changes have varied by line, as this behaviour is indicative of a rational industry whose pricing will change to reflect line-specific concerns rather than broader statistics like aggregated capacity.

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This rationality is likely to support continued rate increases in response to fairly steadily rising loss ratios, according to KBW.

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