Another Hard Market Harbinger: U.S. Commercial Lines Prices Up 4% in Q2

September 12, 2019

In yet another sign of a hardening market, U.S. commercial insurance prices grew at an accelerated rate compared to a year ago, according to Willis Towers Watson’s latest Commercial Lines Insurance Pricing Survey.

Pricing jumped by nearly 4 percent in the 2019 second quarter compared to the same period a year ago, Willis Towers Watson said, noting that increases hovered closer to 2 percent over each of the previous five quarters.

Willis Towers Watson tailed price increases in most lines, with property, excess/umbrella, and directors and officers (D&O) approaching double-digit jumps for the first time in several years. Commercial auto, a weaker outlier in the past, saw reported price increases near or above double digits for the seventh consecutive quarter. The survey found prices trending higher for all account sizes, though more significantly for mid-market and large accounts.

“After so many quarters of modest increases, we are seeing a pickup, backing up general market sentiment,” said Alejandra Nolibos, senior director, Insurance Consulting and Technology business, Willis Towers Watson. “Adverse loss trends in auto and D&O, and deteriorating or potentially deteriorating loss trends in other casualty lines, together with the prospect of potentially diminishing reserve releases seems to have pushed carriers to demand higher prices.”

Commercial insurance prices in the U.S. increased in the first quarter about 2%, according to the insurance broker’s early survey. The first quarter’s price changes for most lines were similar to or slightly above those reported for the fourth quarter of 2018 quarter.

The survey indications are in line with comments from some P/C insurance executives. AIG President and CEO Brian Duperreault said last month he thinks this hardening market is sustainable. “We are seeing strong rate improvement across most of our global portfolio,” Duperreault said during American International Group’s Q2 2019 earnings call on Aug. 8.

Duperreault said he saw rate increases accelerating in the 2019 second quarter.

“I would describe this market as one where there is more underwriting discipline and rigor around the deployment of capacity rather than a major decline in capacity,” Duperreault said. “That discipline seems to be playing out through the pricing models and underwriting processes that are recognizing increased loss costs, frequency … and other emerging risks.”

In his comments on Chubb’s second quarter, CEO Evan Greenberg noted that its premiums rose 6 percent in its North America commercial insurance operations and 9 percent in its its Overseas General division, and that “market-firming” is starting to go global.

“We benefited from an improved pricing and underwriting environment, flight to quality from commercial insurance buyers and our various global growth initiatives,” Greenberg said. “Pricing continued to tighten in the quarter while spreading to more classes and segments of business, particularly in the U.S. and London wholesale market. We’re also seeing early signs that market-firming conditions are spreading to more territories around the world.”

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