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Property/casualty expected rates flat to 5% hike in 2019: USI

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Most property/casualty policyholders are expected to experience flat to 5% rate increases in 2019, with pricing challenges likely to persist in specific coverage lines such as property-exposed accounts in wind-prone areas, habitational risks and large commercial trucking fleets, according to a report by USI Insurance Services LLC.

The property/casualty industry is well capitalized and surplus now stands in excess of $760 billion, according to USI’s 2019 P&C Insurance Market Outlook Report released on Friday. The industry’s combined ratio as of mid-2018 is 98%, according to various rating agencies, but this will likely approach 100% by year’s end, the report predicted.

“P&C market surplus will likely continue to grow, fueled by a booming economy, resultant growth in net written premiums and ever-expanding levels of alternative capital,” the report stated. “In the face of competition from other carriers looking to deploy their surplus capital, incumbent markets are often reluctant to walk away from what they perceive to be below-market pricing and will rather look to strike a compromise with clients and brokers to retain business.”

Policyholders in windstorm, flood and fire-prone areas are likely to experience upwards rate pressure while those in more hazardous industries or with deteriorating loss profiles may be forced to consider retaining more risk to maintain rate, according to the report.

Insurers are also more likely to ask for moderate to high rate increases for many policyholders in the public company directors and officers space, employment practices liability and medical malpractice for health care providers in certain classes, according to the report. By contrast, guaranteed cost workers compensation buyers are expected to benefit from rate reductions despite rising loss trends in most states. For other liability lines, rates have likely bottomed out as markets focus on underwriting discipline, according to USI.

In the real estate sector, multi-family properties continue to experience the most significant insurance capacity challenges, according to the report.

“Beyond the natural catastrophe losses in 2017 and 2018, multifamily portfolios are producing fire and water damage losses, causing some carriers to exit this risk class or increase rate and deductible even for low-loss level insureds,” the report stated. “With overall segment capacity shrinking, insureds with exposures to natural catastrophe and below average loss history can expect significant rate increases. In addition, liability claims involving tenant discrimination, wrongful eviction and sexual harassment have been unrelenting. Real estate owners and managers will need to provide comprehensive information on risk controls and risk management strategies when placing coverage associated with these exposures.”

In the transportation sector, meanwhile, combined ratios for commercial auto liability market continue to deteriorate, reaching 113.5% in 2017, the report noted.

“As a result of the deteriorating underwriting performance, commercial auto liability insurers are increasing rates and/or deductible levels for loss sensitive accounts,” the report stated. “In many cases, companies with a favorable loss experience are facing initial rate increases of 5% or more.”