Average rates for US commercial P&C business ticked up in the first quarter of 2018 as insurers continue to succeed in pressing through rate increases following the heavy cat losses in the second half of 2017.
The quarterly CIAB survey – regarded as one of the most authoritative measures of US P&C pricing – marked the second consecutive quarter of increased premiums following three years of soft market conditions.
Average premiums across all sized accounts increased by 1.7 percent compared to a more modest 0.3 percent in Q4 2017 (see chart).
The uptick responds to the heavy Q3 2017 cat losses from Hurricanes Harvey, Irma and Maria which were then followed by the California wildfire losses in October and December. Last year is now regarded as one of the heaviest claims years in industry history with $130bn+ of cat losses.
However, CIAB president and CEO Ken Crerar warned that insurers continue to face stiff competition from well-capitalised traditional and alternative (re)insurance markets.
“While we find ourselves in the beginning of a transitional market, carriers continued to be aggressive on new business due to excess and alternative capital in the market,” explained Crerar.
One respondent – from a larger brokerage firm – said the continuing expansion of the alternative markets and the amount of capital in the sector has a long-term dampening effect on rate rises.
“The days of the cyclical marketplace are pretty much gone with alternative capital reigning in as reinsurance price increases… with $700bn+ in surplus, it will take an unprecedented event to change the market to an overall hard market.”
Nonetheless, all lines of business experienced some increase in premium pricing, with the exception of workers’ compensation, which saw a 2.0 percent decrease. The average increase across all lines of business was 2.2 percent, compared to 1.7 percent in Q4 2017.
Survey respondents said the demand for cyber insurance is greater than any other line of business with 73 percent of respondents reporting a “somewhat” or “significant” increase in demand for cyber coverage.
Commercial auto remained an industry-wide concern, as rates increased 7.7 percent in Q1 2018, marking the 27th consecutive quarter of increased commercial auto rates.