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U.S. commercial lines increase by 2.5% in Q2: MarketScout

12th July 2018 - Author: Luke Gallin

Analysis by MarketScout reveals that year-on-year, commercial U.S. property and casualty (P&C) rates increased by an average of 2.5% in the second-quarter of 2018, which is above the 2% recorded in the first-quarter of this year.

rate increasesAccording to MarketScout’s Q2 2018 U.S. commercial P&C market barometer and analysis from Keefe, Bruyette & Woods (KBW), an overall 2.5% year-on-year increase is 50bps above the 2% rise experienced in Q1, and 150bps above that seen in Q2 2017.

“Insurers seem to have a longer memory these days. It’s hard to find a commercial insurer who hasn’t suffered from a book of auto/trucking risks in the past ten years. As a result of prior bad experiences and the challenges we outlined in our first quarter 2018 barometer, there are fewer companies willing to write auto or trucking risks. The demand is exceeding the supply so rates continue to trend upward,” said Richard Kerr, Chief Executive Officer (CEO), MarketScout.

Commercial auto recorded the highest average increase of 6% in Q2, followed commercial property’s 4% increase, and EPLI average increases of 3%. Business interruption, BOP, umbrella / excess, professional liability, and D&O liability rates all increased by an average of 2%, while inland marine, general liability, fiduciary, crime, and surety all increased by an average of 1% during the quarter.

The only coverage class that failed to record a year-on-year rate increase during the quarter was workers’ compensation, which fell by 3% in Q2, on the back of a 2% average decline in Q1 2018.

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By account size, MarketScout shows that both small accounts (up to $25,000) and medium sized accounts ($25,001 – $250,000) were up by an average of 3% in Q2. Large sized accounts ($250,001 – $1 million) increased by 2%, and jumbo accounts (over $1 million) increased by 1% in the quarter.

“We expect commercial rate increases to generally improve over the course of 2018, which should benefit both the commercial underwriters and the brokers,” said KBW analysts.

The firm also provides information on personal lines, reporting that U.S. personal lines pricing increased by an average of 2.5% in Q2 2018, which is down on the 3% recorded in Q1 2018.

“Personal insurance rates for personal and commercial automobile are trending in the same direction. Underwriting results for personal auto are not much different than commercial; however, because there is so much more capacity for personal auto, the rate increases are not as severe,” said Kerr.

MarketScout explains that for personal lines homeowners under $1 million value rates increased by an average of 2%, while for homeowners over $1 million value rates increased by 3%. Automobile lines increased by an average of 4% in Q2, while personal articles increased by an average of 1% in the quarter.

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