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Softer commercial insurance prices predicted

Posted On: Aug. 10, 2015 12:00 AM CST

Softer commercial insurance prices predicted

A slow but steady softening in rates will occur in some commercial insurance lines over the next five years, according to an analysis released Monday by Charlottesville, Virginia-based SNL Financial L.C.

But softer prices could be mitigated by macroeconomic factors such as expectations for annual gross domestic product growth in the 2% range from 2016 through 2019, SNL said in its 2015 P&C Insurance Market Report.

“Growth in exposure units resulting from higher levels of nonfarm employment and higher demand for insurance in a growing economy — albeit one that is expected to expand at a modest pace — are projected to drive higher premium volume through 2019,” said the report.

The report predicts declining but positive underwriting margins for commercial insurers.

“The projections anticipate increasing pressure on underwriting results in liability lines, including other liability, product liability and workers compensation, as premium growth rates slow,” said the report. SNL added that commercial auto results may also “remain challenged,” with projected combined ratios several percentage points above 100% annually from 2015 through 2019.

“All told, the average annual commercial lines combined ratio projected for the five-year period from 2015 through 2019 of 96.5% compares favorably to both the historical five- and 10-year averages of 100.1% and 99.3%, respectively,” said the report. But that average annual projected combined ratio would be “well above” the mean of 92.5% for calendar years 2006, 2007, 2013 and 2014, which SNL said “were not characterized by features such as elevated catastrophe losses, large builds in reserves for decades-old asbestos and environment exposures and/or weak macroeconomic conditions.”