A recent survey shows that first quarter property and casualty (commercial) rates have fallen another three percent, on average, for most renewals and small to medium business renewals. Most experts believe that it’s still too early to tell if this is due to the disasters in Japan and other countries earlier this year, or if there is another market influence taking place.
The slowdown in decreasing rates may be an indicator that prices will start to level off. There have been some slight increases, more noticeable in larger businesses, commercial property rates and workers’ compensation. For the most part, general liability rates remained unchanged.
Some carriers are concerned about the Catastrophe models (CAT Models) predicted for this year; the season has just started and activity has all ready been above normal. A higher than normal storm season could have an effect on the market.
Even though most insurers have had a surplus over the last few years, the recent disasters abroad and now here in the U.S., have greatly decreased those reserves. More severe weather outbreaks or a major hurricane could tip the scale and set off a hard market.
After the disasters in Japan, Australia and New Zealand the (CAT property) underwriters began to demonstrate more reserve and discipline in their writings, and have actively supported increases. Brokers are concerned as well, mostly about the economy and federal budget deficit. Healthcare reform is still a concern, but that has been overshadowed by the slow moving economy.
Another concern brokers have is due to workers’ compensation changes. Everyone is seeing small changes in pricing and underwriting of worker comp policies. Brokers from the Midwest have noticed that certain areas are beginning to harden, while brokers in the Southeast see underwriters being more vigil in writing the coverage based on the company’s loss history.
Compared to last quarter there has been a 10 percent increase in consumer demand for commercial products. In the survey last quarter 47 percent said they saw an increase in commercial demand; in the first quarter 57 percent responded that they saw an increase in commercial demand.