Q1 Saw Rate Decreases Continue in Commercial P/C: The Council

May 4, 2016

Commercial property/casualty rates decreased across all size accounts in the first quarter of 2016, continuing a trend that has been evident since the first quarter of 2015. This year, first quarter rates decreased by an average of 3.7 percent.

According to the Commercial P/C Market Index Survey by the Council of Insurance Agents & Brokers (CIAB) rate decreases in Q1 were the largest seen since the trend began, with the exception of large accounts.

“It does not come as a surprise that the soft market conditions we’ve seen over the past year have continued in the first quarter of 2016,” said Ken A. Crerar, president and CEO of The Council.

First quarter rates decreased by an average of 3.7 percent. Large accounts decreased at -4.6 percent, followed by medium-sized accounts at -4.4 percent and small accounts at -2.1 percent.

CIAB Q1 Market Survey
Source: The Council

“Carriers were working hard not to lose their renewals. [They were] trying to put accounts to bed early if they could before they hit the market,” a surveyed West Coast broker said.

The decline in rates was consistent across most lines, with the exception of commercial auto, which increased 3.6 percent in the first quarter and has been increasing steadily since the third quarter of 2011.

“Auto was the only line pushing (and obtaining) rate increases. But there are still some competitive carriers who were writing auto because they were confident in their pricing,” a Florida broker said. Another Southeast broker said that auto is getting difficult to place with loss activity.

Directors & Officers Liability and Employment Practices Liability lines also saw a very slight uptick in rates of 0.2 percent and 0.7 percent respectively.

“While rates have been down, our members have told us that the market has increased capacity across the board and for coastal property coverage, particularly in the Southeast region,” said Crerar. “We have been fortunate to have quiet hurricane seasons the last few years but there is a lot of concern that these new markets will retreat after the first major loss event.”

While the increased capacity has kept rates low, buyers have shown interest in purchasing additional coverages such as cyber, according to the survey.

Looking ahead, some see the price decreases coming to an end soon.

A spring report from Willis Towers Watson said that the pricing declines are beginning to slow down, raising the likelihood that companies will experience some price increases in various commercial lines of insurance in the coming year.

“At the macro-level, the market remains stable and pricing is still considered soft, but we may be starting to see the bottom end of that softening,” said Matt Keeping, head of broking for North America, Willis Towers Watson.

CIAB survey respondents were asked to name the top developments in the industry that they believe have and will impact their business. They cited the following:

  • The economy
  • The price of oil
  • Carrier and broker consolidation
  • Cyber—risks and educating producers and clients
  • Recruiting and retaining talent

“The continued impact of crude oil prices and the trajectory of the global economy weighed on our members’ sentiment at the start of 2016,” said Crerar. “Elevated economic volatility is likely to continue but our members are positive about the opportunities that lay before them to make up for the effects of the oil downturn felt most intensely by brokers in the last quarter of 2015.”

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