Property/casualty insurance rate increases “will probably moderate” into 2015, according to an analysis Keefe Bruyette & Woods Inc. issued Wednesday.
“In our view, returns are no longer either poor enough to sustain the recent pace of insurance pricing improvement or rich enough to stimulate meaningful rate softness outside of a few lines,” KBW said in “2014 Outlook: Prepare for a Soft Insurance Rate Landing.”
The report said commercial insurance should experience steady, low single-digit rate increases during the first half of next year, with pricing “losing steam” by the end of 2014.
“Absent significant catastrophes and/or more aggressive loss cost inflation, we believe returns should match or eclipse most insurers' (return on investment) targets, easing pricing pressure despite still-low interest rates,” said the report.
KBW also predicted steady, mid-single-digit rate increases for specialty commercial lines as specialty insurers seek to improve core underwriting results in the “face of more 'normal' catastrophe losses and less-favorable reserve development.”
Comp, D&O, marine
“While specialty commercial rate increases will probably decelerate overall, there are specific lines where we expect more resilient increases, including workers compensation, public company directors and officers liability, marine, and onshore energy,” KBW said in the report.
KBW said it still expects strong organic revenue growth for insurance brokers.
“In the current environment, we favor technologically sophisticated middle-market brokers that can use their scale and niche expertise to gain share from or acquire their smaller counterparts,” KBW said in the report.