Insurance analysts and executives see examples of strength in rates for coverage lines outside property-catastrophe as parties head into the final month before Jan. 1 renewals.

Signs of medical and legal inflation are driving rate in casualty lines as continued healthy returns bring competition to workers compensation.

“You do have more economic activity, which can translate to, among other things, more lawsuits, more incidents of disagreement. I think we’re seeing some of that,” said Meyer Shields, managing director at Keefe Bruyette & Woods Inc. in Baltimore.

“It does sound like, based on our conversations with insurance executives, there is a developing theme that will contrast with recent years when inflation was very low.”

“In directors and officers insurance, loss costs have been stable in many areas but you hear rumblings about larger settlements and higher litigation costs,” said James Auden, managing director at Fitch Ratings Inc. in Chicago. “That’s led to an inching up in the losses and the companies are responding a bit to that. But it is still competitive and hard to raise rates into that environment.”

“In casualty, medical inflation appears to be ticking northwards, which could eventually put some upward pressure on certain long tail rates,” said Peter Chandler, deputy CEO of JLT Re (North America) Inc. in Philadelphia.

“Overall, the tone for casualty, with the exception of workers compensation, is that rates are on the rise but slowing down,” said Tracy Dolin-Benguigui, director and sector lead for S&P Global Ratings in New York.

Insurers are trying to price adequately for return, but are experiencing differing degrees of success, the analysts said.

“What we’re seeing is overall discipline where insurance companies are pricing to expected returns,” Mr. Shields said. “What we’re seeing is pricing that’s appropriate for the particular line of business based on whether expected returns are adequate” to allocate capital.

“For companies to be able to price their portfolio to earn their target return on capital, there’s still a number of companies that are not doing that, there’s profit challenges still,” Mr. Auden said.

Workers compensation continues to earn insurers healthy returns but may eventually chafe under competition.

“Expected returns in workers compensation are good, thus competition,” Mr. Shields said.

“One outlier softening pretty quickly still is workers compensation,” Mr. Auden said, noting “strong underwriting profits for the segment.” Competition follows that profitability, “and that leads to pricing pressure.”

That, in turn, could lead to earnings pressure or even reserve complications, analysts said.

A decrease in workers compensation rates as medical and legal costs are increasing “will ultimately affect profits,” Mr. Auden said.

In workers compensation, “there are definitely rate decreases, and we’re also seeing flat-to-rising loss-cost trends, but that is being tempered by favorable prior development,” Ms. Dolin-Benguigui said. The release of reserves, however, do “give us pause as companies release reserves prematurely.”

Coverage lines are not moving in lockstep, however, notes Mr. Shields.

“We’re seeing very different trends by line of business and company,” Mr. Shields said.

Commercial property, “really depends on the catastrophe activity and the size of the account,” with more rate needed on larger accounts, Ms. Dolin-Benguigui said.

“Expected returns in most other lines [than workers compensation] are in most cases unacceptable and that’s why you’re seeing rate increases,” Mr. Shields said.

Automotive lines continue to be the most challenging, experts say.

“Personal auto struggles with claims trends like higher frequency and severity of bodily injury and physical damage,” Mr. Auden said, adding, “Technology in cars leads to higher repair costs.”

“The wheels business in particular has had some difficult years and therefore we have seen some firming in commercial and personal lines,” Mr. Chandler said. “It needed it. But there’s still capacity for it. There is still capital available at the right price for all lines of business.”

“We’re really seeing no end in sight in terms of the needed rate action,” in commercial auto, Ms. Dolin-Benguigui said.

Many of the coverage lines other than property-catastrophe have not seen rates whither under the onslaught of outside capital that has found its way to catastrophe markets through insurance-linked securities and other mechanisms.

Most commercial lines “have very little exposure to the amount of capital available to property/catastrophe reinsurance,” Mr. Shields said.

Competition and widely available capital and reinsurance, however, could ultimately blunt upward rate pressure, experts say.

“There are questions as to whether you’ll get further upward movement going forward given competitive factors that we think could turn things flattish again pretty quickly,” Mr. Auden said.

A recent report from Marsh LLC notes that “Globally, composite pricing has increased each of the last four quarters,” however, “Average insurance pricing in the US decreased nearly half a percentage point in the third quarter of 2018, reversing a trend toward flat pricing observed over the prior year.”

“Widely available, reasonably-priced reinsurance helps to put a constraint on movement upward in primary rates,” he added.

“I firmly believe the supply of capital still exceeds the demand for that capital and therefore I would think it would be a fairly benign renewal season especially property-catastrophe,” Mr. Chandler said.

Lofty expectations for large rate increases following the historic 2017 catastrophe losses, many of which went unfulfilled, may not materialize this year.

“I don’t think the gap between expectation and reality will be as severe this year,” said Mr. Shields.