Reinsurance pricing to remain under pressure: KBW

Reinsurance pricing is likely to remain under pressure, while rate trends in commercial property/casualty lines will be “mixed,” according to an analysis released Tuesday by Keefe Bruyette & Woods Inc.

In “2Q14 Underwriter Recap: Is This as Good as It Gets?” KBW said that commercial and specialty insurers, along with reinsurers, underperformed the broader market through the second quarter earnings season.

“Looking out, we expect reinsurance pricing to remain under pressure, while rate trends within commercial lines will likely be mixed,” said KBW. “Commercial auto and workers (compensation) will likely continue to 'enjoy' solid rate increases over the next few quarters along with regions heavily impacted by weather losses, though remaining low loss regions and casualty and specialty lines will likely see rate deceleration and more common declines by year end.”

The report also addressed the continued low interest rate environment and its effect on insurers. “As recent history and failed predictions for 'interest rates having nowhere to go but up' proves, insurers should be embedding cautious interest rate expectations into their pricing,” said KBW. “As much as this seems rational, pricing continues to decelerate.”