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Commercial p&c pricing in United States down slightly in 2014 Q4


January 28, 2015   by Canadian Underwriter


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Premium pricing for the commercial property/casualty market in the United States was slightly lower in 2014 Q4, closely mirroring the previous quarter, although wind and hail losses continued to be a problem for some regions, note survey results released Tuesday by the Council of Insurance Agents & Brokers (CIAB).

“Changes weren’t particularly dramatic last quarter and capacity remained ample for good accounts and new business – very similar to what we saw in the previous quarter,” CIAB president and CEO Ken Crerar says of figures in the quarterly Commercial P/C Market Index Survey, which dates back to 1999.

On average, large, medium and small accounts declined by just 0.7% in 2014 Q4 compared to a small increase of 0.1% in the third quarter, notes a statement from CIAB. More specifically, a chart prepared by Barclays Research shows that since the fourth quarter of 2013, the increases/decreases in commercial rates were as follows: -0.7% in 2014 Q4; 0.1% in 2014 Q3; -0.5% in 2014 Q2; 1.5% in 2014 Q1; and 2.1% in 2013 Q4.

the Council of Insurance Agents & Brokers released its Commercial P/C Market Index Survey

CIAB reports that in the fourth quarter of 2014, large accounts had the largest pricing drop, -2.2%, while medium accounts decreased -0.9% and small accounts rose 1.1%. The highs and lows for small accounts was 20.8% and -10.0%, respectively; for medium accounts, 31.7% and -15.0%, respectively; and for large accounts, 33.0% and -15.9%, respectively.

Of the 2014 Q4 results, Crerar notes, “Congress’ dithering over TRIA (Terrorism Risk Insurance Act) reauthorization caused some unease in that market, but the passage of the TRIA extension should settle those concerns.”

Overall, most surveyed brokers reported no significant changes in the market. “If anything, there was a trend towards market softening in the fourth quarter,” the CIAB statement notes. Competition clearly was a factor in keeping rates down.

the Council of Insurance Agents & Brokers released its Commercial P/C Market Index Survey

CIAB reports that demand for commercial insurance generally was up in 2014 Q4, a stark contrast to the dramatic drop in demand during the 2007 recession. In particular, brokers saw an up-tick in interest in cyber risk coverage.

Wind and hail losses continued to be a problem for some regions of the U.S. In the Pacific Northwest, for example, recent hail activity resulted in many carriers “pushing separate/higher wind/hail deductibles, while maintaining relatively flat rates,” while in the Southwest, carriers tightened property underwriting and increased the use of wind and hail deductibles.

In general, CIAB notes, as has been the case in past quarters, carriers were more aggressive on new business, while trying to hold the line on renewals with good loss experience.

By line, a chart in the report shows that fourth quarter 2014 rate changes ranged from -2.2% to 3.0%. To reach the average 0.1% increase in 2014 Q4, by line, commercial auto was 3.0%, workers’ compensation was 0.7%, commercial property was -2.2%, general liability was -0.4% and umbrella was -0.3%.

In addition, rate changes in other lines for 2014 Q4 were as follows:

* business interruption: -1.3% (compared to the a high of 28.8% and a low of -10.2%);

* construction: 0.0% (compared to a high of 38.7% and a low of -10.7%);

* directors and officers (D&O) liability: 2.3% (compared to a high of 32.4% and a low of -8.7%);

* employment practices: 2.8% (compared to a high of 21.9% and a low of -8.1%); and

* surety bonds: 0.1% (compared to a high of 11.2% and a low of -2.3%).


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