Property/casualty rate increases expected to continue: USIPosted On: Jun. 21, 2019 12:26 PM CST
Property/casualty insurance policyholders are seeing accelerating rate increases and a reduction of capacity in certain lines of business and this trend is expected to continue through the end of 2019 and perhaps beyond, according to a report by USI Insurance Services LLC.
Catastrophe-exposed property accounts, umbrella and excess liability and public company directors and officers policyholders are seeing double-digit rate increases, according to USI’s 2019 Mid-Year Commercial Property/Casualty Insurance Market Forecast.
The property/casualty Insurance Industry finished 2018 with a combined loss and expense ratio of 99.2% and near-record surplus as a function of liabilities, USI said in the report.
“This is not the kind of financial performance that usually leads to a hard market,” USI said.
In property, up to 40% and higher rate increases are being seen across all categories, with CAT-exposed properties, loss leaders and frame multifamily properties seeing the higher increases, the report said.
“We are seeing carriers ask for and achieve increased rates, increased deductibles, and reduced coverage especially in the distressed areas of real estate, i.e. multifamily,” USI said in the report.
Policyholders in most industries, not just those with large auto fleets or poor loss experience, have been assessed umbrella and excess liability rate increases of up to 20% in the past six months, USI said.
“Compounding this problem, insurers are reducing their limits from an average of $25 million to $10 million/$15 million with no corresponding rate decrease in the price per million dollars of coverage,” the report said.
Workers compensation is the one casualty line that continues to show a relatively stable market, according to USI.
“Despite premium rates in most states declining over the past 5 years, favorable loss trends, stable or declining medical costs, redundant loss reserves, rapid gross premium growth and improving investment gains have resulted in a low combined ratio overall,” USI said in the report.
Guaranteed cost buyers are expected to continue to benefit from a competitive environment, with low single-digit rate reductions in most states, according to the report.
Those buyers with adverse losses, declining financial results or in difficult state jurisdictions or industry classes will see some “moderate upward rate adjustments,” USI said in the report.
Most public company D&O policyholders with first-quarter 2019 renewals saw up to 15% and more premium renewal increases, and pricing has deteriorated “significantly” since then, with rate increases of 30% or higher, according to the report.
While certain lines of business have been unprofitable and long overdue for rate adjustments, “we have to wonder at what point new capacity will begin to flow into the market seeking expanded market share on the improved terms being achieved,” USI said in the report.
The report predicts that loss trends could continue to deteriorate, perhaps due to worse than average cat losses, resulting in continuing hard market conditions into 2020.
“Underwriters seem to believe the hardening market will continue,” USI said in the report.
The other scenario is that rate increases will begin to level off in the fourth quarter of 2019 as more markets begin to deploy their capacity and compete for business, the report predicts.