Predictions on commercial insurance pricing was just one topic of the annual Insurance Leadership Forum sponsored by The Council of Insurance Agents & Brokers (CIAB). Speakers at the forum — held a couple of weeks ago in Colorado Springs, Colorado — predicted continuing rising prices.
As you know, most lines have seen rates creeping up the last couple of years. Panel participants said that is because claims levels are now considered unsustainable and with now, low interest rates, there is a higher need for increased rates, limits that run lower and coverage that isn’t quite as wide.
That led to the prediction that not only will prices rise the rest of the year and into next year, but they could keep going up even beyond next year.
Aon’s Brian Wanat put it best. “With each passing month, rates have gone up more. We’re looking preliminarily at Q3 being greater than Q2 and we see it gaining momentum at this point,” he pointed out. “I think everything outside of workers comp is going up double digits right now, certainly for the larger accounts.”
Mike Rice is the CEO of RSG Underwriting Managers. Though rates have been rising significantly, he doesn’t believe the current rate hikes can be defined as a hard market. “I don’t think it’s necessarily a hard market; it’s a firming market, but it’s spotty,” he said.
And that spotty for the reasons Wanat listed. That is workers’ compensation and smaller cyber accounts in particular.
David Perez of Liberty Mutual’s Global Risk Solutions said after years of rate cuts, the industry is ready for — and is accepting of — the need for pricing change. He pointed out that excess casualty loss trends are rising “anywhere between 12 and 20 points and most markets are just trying to keep up with that so they don’t slip backwards.”
Berkshire Hathaway Specialty Insurance executive vice president David Bresnahan agrees and said market conditions are in rapid change. He pointed out that insurers are cutting limits on excess casualty. They’ve gone from $25 million to $15 million to $10 million and — he said — even to $5 million.
And that’s happened in just the last few weeks.
Bresnahan’s colleague Sanjay Godhwani — who is also an executive vice president at Berkshire Hathaway Specialty — agrees. “What may have been a high single-digit/low double-digit rate increase started turning into mid double digits and now you are hearing 15, 20 or 25-point rate increases as averages in the market,” he said.
In the end the predictors all predicted and agreed that rates will firm up throughout P&C markets at least through 2020. Likely beyond that, too. This is where Denis Brady of Burns & Wilcox Brokerage summed things up.
“It sounds as if this may have some legs on it,” he said referring to a hardening market. “In the past, we’ve had blips, but I think with everything that’s happened with Lloyd’s and some of the catastrophes, the fact that some lines have had low rates for a while and there’s not much new capacity coming into the market, I think this could go on for some time.”
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