For the last couple of years insurance rates have been rising. The industry has dragged itself — in an odd way, some say — out of the soft market. Some like MarketScout went so far as to declare the soft market history.
And to a certain extent that may be true. Traditional insurance watchers and economists say that’s not the case, but whatever the case, rates rose and after a long soft market, it was welcome.
Now rates are slowing for P&C lines and personal lines. That’s not the case for excess and surplus lines. Or so says the Moody’s Investors Service report the U.S. Excess and Surplus Sector Profile. Both are seeing growth and strong profitability. Moody’s said the reason is because of a limited appetite on risks that have kept prices “adequate.”
Moody’s emphasized that as capacity and competition increase P&C rates will continue to drop. Prices will rise for excess and surplus lines but — like its cousins on the casualty side of things — at a slower rate.
A.M. Best came to the same conclusion. In a Best Special Report, the ratings firm said relatively few casualty claims in 2013 helped increase profitability for excess and surplus lines. Underwriting was more profitable and investment gains rose.
Best says the market is stable. However, profits are anticipated to fall as competition grows.