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U.S. commercial rate movements continue positive trend in Q2: MarketScout

12th July 2017 - Author: Luke Gallin

U.S. commercial property and casualty (P&C) rates increased by an average of 1% year-on-year in the second-quarter of 2017, on the back of an average 1% increase in the first-quarter of the year, according to MarketScout and Keefe, Bruyette, & Woods (KBW).

The average 1% increase witnessed in the second-quarter maintains the more positive trend of U.S. commercial P&C rate movements seen in 2017, and compares to a 1.7% average decline in Q2 2016.

Richard Kerr, the Chief Executive Officer (CEO) of MarketScout, which tracks commercial insurance rate movements via its insurance rate barometer, commented; “We now have two consecutive quarters of composite rate premium increases. Insurers are adjusting pricing as they should based upon losses incurred, expense loads and targeted returns on equity.”

Throughout 2016 U.S. commercial P&C rates had declined, on average, month after month, so it’s promising to see rate movements in the space reverse this trend so far in 2017.

By coverage class, MarketScout explains that commercial property and inland marine increased by 1% during Q2, while commercial auto rates increased by 4%. EPLI rates increased by 2% during the period, and Fiduciary and business interruption rate movements were flat.

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D&O Liability & Professional Liability rates also increased by an average of 2% in Q2, while crime, surety, general liability, BOP and umbrella/excess increased by 1%. Workers’ compensation rates declined by an average of 2% during the second-quarter.

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

Analysts at KBW also commented on the U.S. commercial P&C pricing arena in the second-quarter, stating; “We remain neutral on most primary commercial insurers and positive on most P&C brokers. Rate changes that trail loss cost trends make underwriting margin improvement very difficult absent company-specific actions, especially if (as is typical during soft P&C pricing periods) reserve releases fade further. We expect rates to remain pressured in 2017.”

MarketScout also offers provides information on personal lines rate increases in the second-quarter of 2017, revealing that the composite rate for all personal lines placements in the U.S. increased by 2.5% when compared with the same period in 2016.

Homeowners’ policies with coverage under a value of $1 million saw an increase of 2% in Q2, compared with 3% in the first-quarter of 2017. Homeowners’ policies with a value of more than $1 million also saw an increase of 2% in the second-quarter. Automobile reported an increase of 4%, and personal articles lines saw an increase of 1%, in Q2 2017.

Kerr, commented; “We are just beginning hurricane season in the coastal areas so storm activity will play an important role in rates for the next two quarters. So far this year, inland wind and hail claims have been quite significant. Also, personal auto losses are increasing. As a result, more rate increases could be coming.

“You have to keep in mind, the composite rate is an amalgamation of rates and exposures across the US. If you are in a coastal area, hail belt or benign location, your rates will vary based upon exposure and recent loss experience.”

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