Commercial P&C market takes a step back as premium pricing dips in Q4

Premium pricing for the commercial P&C market was slightly lower in the fourth quarter of 2014, according to the latest quarterly Commercial P/C Market Index Survey by The Council of Insurance Agents & Brokers.

Overall large, medium and small accounts declined by 0.7% on average compared to a small increase of 0.1% in the third quarter of 2014.

While the average pricing drop is slight for accounts of all sizes, large accounts experienced the largest drop in pricing, the survey shows. On average, large accounts experienced a drop of -2.2%, while medium accounts dropped -0.9%.

For small accounts, however, prices rose slightly in the last quarter of 2014, with a 1.1% increase.

“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,” said Ken A. Crerar, president and CEO of The Council. “Congress’ dithering over TRIA reauthorization caused some unease in that market, but the passage of the TRIA extension should settle those concerns.”

Survey results indicated that most brokers reported no significant change in the market in the fourth quarter, although results varied somewhat by line, region and loss experience.

If anything, there was a trend toward market softening in the fourth quarter, The Council indicates. But the survey results do show that competition is a factor in keeping rates down, as brokers in the northeast reported “fierce competition” that was having an impact. One respondent noted that there was “a feeding frenzy at the end of the year to write new premium.”

 

The situation was similar in the southeast, as pricing overall was pushed lower amid new competition. In the Midwest, another broker noted, “terms are easier to negotiate, prices continue to be driven by competition.”

Consistent with previous quarters, carriers were more aggressive on new business, while trying to hold the line on renewals with good loss experience. Carriers are holding to strict underwriting guidelines, according to the report, but they also want to write new business, and there is more flexibility on larger accounts.

Furthermore, carriers are also looking for renewals with a good loss history. A broker in the Midwest indicated that his firm is “generally more aggressive on new business and renewals with a clean loss history.”

In other regions, weather played a role. Wind and hail losses continued to be a problem for some regions, specifically the Pacific Northwest, where brokers have seen “increased scrutiny on property risks given recent hail activity.” Respondents indicated, “many carriers are pushing separate or higher wind/hail deductibles, while maintaining relatively flat rates.” Similarly, in the Southwest, carriers tightened property underwriting and increased the use of wind and hail deductibles.

But, as a whole, demand for commercial insurance was up in the fourth quarter, according to 90% of respondents. This marks a stark contrast to the drop in demand during the recession in 2007. Brokers overall have also witnessed an increased interest in cyber risk coverage, which The Council predicts has been piqued by high-profile hacking attacks, such as the incident involving Sony.

 

Jan 28, 2015 | By Hannah Bender

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