Analysts at S&P Global Ratings are “optimistic” about the continuation of re/insurance rate increases into 2020, following what they regard as an inflection point in 2019 for premium pricing.
After a prolonger period of pricing remaining too low in many product lines, rates began to pick up momentum in 2018, before significantly accelerating in 2019 and finally keeping pace with loss cost trends for many lines.
There are several lines where S&P sees pricing actions as reflecting long-overdue pricing corrections, such as commercial auto, large account property, financial, and professional lines.
The rating agency also believes that underwriting standards have improved across the industry, in particular for larger insurers who have been reducing limits, raising attachment points, and redefining their underwriting appetites.
Analysts are similarly seeing cross-line subsidisation to compensate for under-pricing in vulnerable business lines, such as in commercial auto, which is in many cases becoming the enabling product for commercial multi-peril packages policies with the same client.
Based on S&P data, the industry’s statutory combined ratio of 97.9% in the first nine months of 2019 was modestly up from 97.5% during the same period in 2018.
Underwriting performance through the first nine months of 2019 also compared favourably with previous figures, and prior-year favourable reserve development remained robust but dipped to $6.9 billion 9M 2019, compared with $11.1 billion in 2018.
However, S&P anticipates this reduction in favourable reserve development was offset with lower catastrophe losses during the first nine months of 2019 compared to the same period the previous year.