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Moody's predicts slowing property/casualty rates, more competition in 2014


Commercial property/casualty rate increases will continue to taper off in 2014, according to an analysis released Monday by Moody's Investors Service.

Moody's noted in “US P&C Insurers Start 2014 With Healthy Credit Metrics Following Low Cat Losses and Strong Profits in 2013,” that the pace of commercial lines rate increases began to slow in the middle of 2013. Looking ahead, Moody's said that it expects that competition among property/casualty insurers will pick up this year because of the industry's strong capital base and improved profitability.

Moody's said that although casualty rate increases will continue to slow, “we expect pricing trends in commercial casualty lines to remain in positive territory, exceeding loss cost trends.” Moody's cited three factors for this: continued low interest rates, the fact that accident year combined ratios for some casualty lines are still not meeting target returns, and reserves releases will likely continue to slow.

“Barring significant catastrophes, we expect increasing pressure on commercial property rates as the year progresses given below-average catastrophe losses in 2013 and increasing competition,” said Moody's. “In addition, primary companies have received the benefit of lower reinsurance pricing at Jan. 1 renewals, reflecting competitive pressure from alternative capital. Lastly, we expect continuing share repurchases as pricing power slows, and public companies look to increase total returns to shareholders.”