Rate increases for U.S. commercial property/casualty liability insurance should continue throughout this year, but at a slower rate than in 2013, according to an analysis released Friday by Moody's Investors Service Inc.
In “US P&C Insurance Survey: Slowing Commercial Rate Increases as Insurers Shift Toward Growth,” Moody's said the insurers it rates are expecting rate increases of about 6% for liability insurance policies written this year, down from 7.5% from last year.
“However, the rate increases are still large enough to continue to expand underwriting margins given that rate increases remain above loss ratio trends,” said Moody's in the report.
The liability lines covered include workers compensation, commercial general liability, professional liability, commercial auto liability and commercial multiple peril.
Commercial property rate increases are also expected to drop, to 3% this year from 4.5% last year. Moody's added that given falling reinsurance prices, “we believe that pricing increases could fall even further over the course of 2014 and even decline later in the year if there are no major catastrophes.”
The rate increases for commercial liability lines would mark the fourth straight full year of rising rates, Moody's said. Rates began to rise in late 2010 and 2011 in response to low investment returns and rising accident year combined ratios, which hit a high of about 110% in 2010 and 2011 but have declined steadily since then.
“We expect commercial casualty insurers' combined ratios to decline to about 99% for accident year 2014 and 96.5% for accident year 2015 compared to 103% for accident year 2013.”
Moody's noted that insurers also indicated an increased willingness to write new business for workers comp and commercial general liability.
“As insurers look to retain existing profitable business and shift toward growth for casualty lines, rate increases could slow further as the year progresses, although we don't expect rate declines in 2014,” said Moody's. “Companies' risk appetite for professional liability and commercial auto liability continues to moderate.”