U.S. commercial P&C pricing continued to stabilize in 2014 Q3: survey

The commercial property/casualty market in the United States appeared to stabilize in 2014 Q3, with negligible price increases overall, note the results of a new survey released Wednesday by the Council of Insurance Agents & Brokers (CIAB).

On average, small, medium and large accounts in the third quarter of 2014 rose an average of only 0.1% compared to negative 0.5% last quarter, notes CIAB’s quarterly Commercial P/C Market Index Survey. The survey of commercial P&C market conditions, pricing practices and trends dates back to 1999.

The council reports in a chart prepared by Barclays Research that small accounts experienced the largest increase of 1.1%, while large accounts fell 1.1%. More specifically, below are the percentage changes by quarter starting with the fourth quarter of 2013 to the third quarter of 2014:

• Small accounts – 2.6% for 2013 Q4, 3.0% for 2014 Q1, 1.2% for 2014 Q2, and 1.1% for 2014 Q3;
• Medium accounts – 2.4% for 2013 Q4, 1.6% for 2014 Q1, -0.2% for 2014 Q2, and 0.3% for 2014 Q3;
• Large accounts – 1.4% for 2013 Q4, -0.1% for 2014 Q1, -2.6% for 2014 Q2, and -1.1% for 2014 Q3.

A number of surveyed brokers reported market softening for property along the eastern seaboard of the U.S., while the relatively calm catastrophe season helped keep coastal property rates stable, notes a statement from CIAB. 

One broker in the northeast commented that “coastal wind restrictions were looser without any storms,” while another broker in the southeast reported seeing “premium reduction in coastal/wind and an increase in competition from non-admitted markets.”

The southwest fared worse, however, with brokers in parts of the region struggling with wind and hail risks. “Wind/hail property deductibles are significant factors in new and renewal placements,” one respondent noted.

As one broker in the southwest noted, “More capacity means decreasing pricing and more favourable terms and conditions. The market is no longer firming.”

Surveyed brokers also reported that carriers continued to be aggressive on new business and were willing to negotiate on good renewal accounts to keep them from going on the market.

“Capacity remained plentiful and underwriters were still eager for new business. We’ll have to wait for the fourth quarter results to see whether the third quarter portends what’s in store going forward,” Ken Crerar, CIAB president and CEO, notes in the statement.

By line in 2014 Q3, the rate changes ranged from -1.6% to 2.6%, notes the report. More specifically, rates for commercial auto increased 2.6% in 2014 Q3 (1.7% in 2014 Q2), rose 2.3% for workers’ compensation (3.1% in 2014 Q2), decreased 1.6% for commercial property (down 2.6% in 2014 Q2), increased 0.6% for general liability (0.1% in 2014 Q2) and climbed 0.6% for umbrella (0.3% in 2014 Q2).

Topping the list of other concerns for brokers were acquiring and retaining talent, cyber and terrorism risks, competition and global challenges, the council statement notes.

A chart in the report – Rate Changes in Other Lines – for 2014 Q3 indicates the following:

• Business interruption – rate changes in Q3 were -0.2%, with a high of 28.8% and a low of -10.2%;
• Construction – rate changes in Q3 were 0.2%, with a high of 38.7% and a low of -10.7%;
• D&O liability – rate changes in Q3 were 2.2%, with a high of 32.4% and a low of -8.7%;
• Employment practices – rate changes in Q3 were 3.1%, with a high of 21.9% and a low of -8.1%; and
• Surety bonds – rate changes in Q3 were 0.4%, with a high of 11.2% and a low of -2.3%.