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The Soft Market, Storms, Fires & Insurance Pricing

Posted By Administration, Tuesday, November 7, 2017

The quarterly joint report by ISO and the Property Casualty Insurers Association of America (PCI) said profits declined for P&C insurers in the first half of 2017. Here are the report’s — if we can call them that — highlights:

  Net income — after taxes — dropped 29% to $15.5 billion when compared to the first half of 2016

  The annualized rate of return on policyholders surplus dropped 4.4% from 6.4% last year

  The combined ratio fell to 100.7% from 99.7% a year ago

  Underwriting losses were $4.5 billion in the first six months compared to $1.5 billion in 2016

  Policyholders surplus is at a record level $717 billion up from $709 billion last quarter and $708 billion in quarter four of 2016

 

Other highlights:

  Premium growth is 4.1% compared to 3.1% in the first half of last year

  Premium growth is $4 billion above the 10-year average

  Earned premiums rose 3.4% to $265.8 billion

  LLAE jumped 5.7% to $194.3 billion

  Underwriting expenses are up 1.6% to $75 billion

  Policyholders dividends remained the same at $1 billion

 

Here’s the biggest concern of the report:

  The underwriting loss is $4.5 billion

  That is 3x the $1.5 billion loss of the first half of 2016

 

While the report is full of bad and neutral news, apparently nearly all commercial insurance lines are seeing renewal rate increases. That tidbit is courtesy of IVANS.

  Commercial auto premium renewal rates jumped an average of 3.1%

  General liability rates are up 1.8%

  Umbrella rates rose 1.3%

  Commercial property umbrella rates were up 1.3%

  Commercial property rates themselves increased 2.8%

  BOP policies are seeing a 3.6% jump

 

The only line to see things in the negative is workers’ compensation. Rates fell in that line by 2.2%

There’s another factor at play. Experts say we just experienced the worst hurricane season in decades. Will this drive us into a hard market? Probably not says a report issued by Bloomberg of some of insurance’s top CEOs.

 

Evan Greenberg, CEO, Chubb: “I believe we are at the beginning of a firming price environment, driven by years of soft pricing that has resulted in inadequate rates in many classes. The magnitude of this year’s CAT losses, which on a worldwide aggregate basis was between a one-in-five and one-in-10 year industry event, simply adds to the pressure to return to pricing that produces an adequate risk-adjusted return.”

 

Dan Glaser, CEO, Marsh & McLennan: “While there could be some movement in pricing in catastrophe-exposed areas in certain lines of coverage, the degree and sustainability of any changes remains uncertain. From our vantage point, too much is unknown about how losses will ultimately develop, how capital will react or how client buying patterns will change. ... Right now, it is just too early to tell.”

 

J. Patrick Gallagher Jr., CEO, Arthur J. Gallagher: “…it appears there could be some modest hardening on U.S. property lines.”

 

J. Powell Brown, CEO, Brown & Brown: “There continues to be a lot of capital across the insurance marketplace. However, the recent storms, fires and earthquakes may have implications on pricing in 2018. At the present time, we don’t have a clear view on the potential impact for next year, but there are a lot of discussions about rate increases for coastal properties. If there are proposed increases, which we think there will be, the question really is, will they stick?”

 

Gregory Hendrick, President of Property & Casualty, XL Group: “We believe that all lines will be impacted from a pricing and terms and conditions perspective. ... We are starting to see rates on short-tail lines increasing to double-digit range, with loss impacted accounts seeing higher increases. ... While there is the normal competing view amongst underwriters, brokers and clients on the breadth and magnitude of the market change, we fully expect there to be more favorable trading conditions in 2018.”

 

Source links: Business Insurance, Bloomberg, Reinsurance News

Tags:  Fires & Insurance Pricing  Insurance Content  Insurance Industry  Insurance News  Storms  The Soft Market  Weekly Industry News 

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