Premium renewal rates continued to show a year-on-year increase across almost all commercial lines during the second quarter of 2019, according to data from the latest IVANS Index.
IVANS, which is a division of Applied Systems, noted that every commercial line except Workers’ Compensation experienced increases in average premium renewal change compared to the previous year.
However, when compared quarter-over-quarter, there was greater variability in rate movements.
For example, General Liability and Commercial Property both increased compared to the previous quarter, while Commercial Auto, Umbrella and Workers’ Compensation decreased, and Business Owners’ Policy remained flat.
Commercial Auto saw the greatest renewal rate change for the quarter at 4.33%, with a quarter high in June at 4.39%. BOP was close behind at 4.19%, finishing the quarter at 4.18% in June.
Commercial property finished the quarter with a high of 4.25%, but averaged slightly lower at 3.92%.
Meanwhile, General Liability saw an average rate change of 2.29% in Q2, relative to 1.67% in Q1, with a low of 2.18% in April.
Umbrella achieved only a slight premium rate increase in Q2, averaging 2.59% for the quarter, compared with 2.54% in Q1, although it reached a high of 2.66% in June.
In contrast, Workers’ Compensation lines experienced an average premium renewal rate change of -3.56% in Q2, down from a Q1 average of -2.95%.
“From Q2 2018 to Q2 2019, we see the trend of most Commercial Lines increasing with the exception of Workers’ Compensation,” said Brian Wood, Vice Vresident of Data Products Group, IVANS Insurance.
“These data driven insights are indicating that premium pricing in the market continues to harden, providing opportunity for greater profitability across certain lines of commercial business,” he added.
Analysts at KBW said that premium and rate increases in commercial lines are expected to gain steam over the next year in response to inadequate expected underwriting returns and depressed interest rates.
This is despite some quarterly and monthly fluctuation in rate movements for some lines, which KBW considers to be inevitable.
The firm added that it sees P&C pricing as dependent on whether expected returns are adequate for incremental capital providers, rather than absolute capital levels.
“For most commercial lines, we think they’re not,” it stated, “especially considering significant YTD interest rate decreases that further dampen overall expected returns.”
The IVANS Index analyses more than 120 million data transactions from 32,000 agencies and 400 insurers and MGAs to track premium rate trends year-over-year in the U.S insurance market.
