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Commercial property/casualty rates could slide in 2016

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Commercial property/casualty insurance rates are likely to decrease next year, according to an analysis released by Moody's Investors Service Inc. Wednesday.

The overall pricing trend for commercial casualty coverages “is slipping below the loss ratio trend in 2015 (up low single digits), and we expect the trend to be flat or slightly negative in 2016,” said New York-based Moody's in “U.S. P&C Commercial Insurance: Stable Outlook, but Margin Compression Begins.”

The report noted that the overall pricing trend for commercial property has already turned negative, “and we expect it to be more negative in 2016,” according to the report, which noted that property pricing is affected by the lack of catastrophes and a soft market for property reinsurance.

In addition, Moody's said it believes that insurers' overall profit margins will be “constrained” by the continued low yields on investment.

The report cited cyber insurance as a growing niche market that presents both opportunity and risk for underwriters.

The report said cyber insurance is a small but “rapidly growing commercial lines niche, spurred by the rising frequency and severity of data breaches at corporate and government entities.” But it also noted that cyber insurers are wary of writing large-dollar polices because of the paucity of historical loss data, potential aggregations across industries and the rapidly evolving nature of the risk.