‘Modest expectations’ for property/casualty price hikes

There are “overall modest expectations” for U.S. property/casualty commercial price increases in 2019, says A.M. Best Co. Inc. in a report issued Tuesday.

Further price increases are expected in commercial auto, whose losses remain a drag on the industry’s overall profitability, says the Oldwick, New Jersey-based firm in its report 2019 Review & Preview: U.S. Property/Casualty, in which it maintains a stable outlook for the industry overall.

“Other liability,” which has seen a number of years of favorable experience, driven in large part by favorable development of prior years’ loss reserves, “has shown more variability,” says the report.

But other commercial lines are expected to remain flat or decline modestly, says the report.

“Workers compensation pricing has seen modest decreases overall in the most recent years, although much of the decline in rates has been offset by higher payrolls due to higher employment levels and some upward pressure on wages,” says the report.

A.M. Best estimates the industry will report a 101.5% combined ratio for the industry in 2018 and an improvement to a 101.2% combined in 2019.

U.S. catastrophe losses reached a near-record high in 2017, while in 2018, the fourth quarter’s Hurricane Michael and California wildfires drove a second year of catastrophe losses above the long-term average, according to the report.

Best estimates net catastrophe losses in 2018 totaled $37 billion in 2018, compared with $53 billion in 2017. The projection for 2019 is a decrease to $31 billion.

The report also said that higher interest rates “should provide some tailwinds to the P/C industry given its substantial reliance on net investment income to boost profits,” but the fourth-quarter’s turmoil in the U.S. and global equity markets is expected to drive down overall investment returns for the year, according to the report.