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Many commercial property/casualty rate increases appear to be accelerating, according to a recent report by USI Insurance Services LLC.
Fewer lines such as workers compensation and primary general and products liability were flat or down from midyear, according to USI’s 2019 Fourth Quarter Commercial Property/Casualty Insurance Market Outlook, released Nov. 1
Noncatastrophe-exposed property accounts with good loss history, which were up 10% in USI’s June outlook, are up 10% to 20% in the fourth quarter update.
Catastrophe-exposed properties with minimal loss history, up 10% to 40% at midyear, are now up 25% to 40%; and property accounts of all exposures with poor loss history, up 10% to 40% or more at midyear, are now up 30% to 60% or more, USI figures showed.
“Property insurance carriers continue to retrench because losses are significantly eroding their profits,” the report said. “This flight to quality results in many carriers exiting or severely reducing capacity in areas prone to” natural catastrophes.
Those “scrutinizing” their North American property business — impacting capacity, rates and coverage — include American International Group Inc., FM Global and Lloyd’s of London, USI said.
Primary general and products liability, flat to up 15% at midyear, is now up 5% to 10%, according to USI.
USI noted, however, that “legal financing trends, higher settlement verdicts and a more socially conscious public are all contributing to rising severity rates.”
“For liability lines, we expect insurers to continue to demonstrate conservative underwriting and not deploy surplus capital to write new business, with very few exceptions,” the broker added.
Directors and officers coverage, up 10% to 30% or more at midyear, is now up 25% to 50% or as much as 100% if there is a “troubled” chairman of the board, and conditions are expected to continue in that direction, USI said.
“It appears both the speed and severity of increases has been underestimated given what is now being seen broadly across the market in both renewal and new business such as initial public offering placements. We do not expect this trend to abate in the Q4 of 2019 or for FY 2020; in fact, we expect conditions to continue deteriorating,” the USI report said.
Average commercial insurance pricing increased 7.8% in the third quarter of 2019, the eighth consecutive quarter of average price increases, according to the Marsh Global Insurance Market Index, released Monday.