Commercial-Lines Pricing Survey, MarketScout
Report Show Further Signs of Upward Market Turn
only about 42 percent of the group’s net-
earned premiums.”
The insurers were: ACE, Allstate, Chubb,
Markel, ProAssurance, Travelers and CNA.
Close to 60 percent of the surveyed
companies reported lower reserve releases
on a year-over-year fourth-quarter basis,
and 25 percent ( 13 out of 54) of the
net
BY MARK E. RUQUET
EVIDENCE OF A market turn continues to mount, as a survey of commercial-lines executives shows rates rose 3 percent in 2011’s fourth quarter—and recent analysis contends that rates
could climb by as much as 10 percent over this year.
We are now at a
point where we can call the
pricing turn in the market.”
Thomas Hettinger, P&C Sales and
Practice Leader for the Americas
at Towers Watson
In its most recent Commercial Lines
Insurance Pricing Survey (CLIPS), Towers
Watson says the 3 percent rise in rates in
Q4 2011 compared to Q4 2010 continues
the trend of a progressive rise in rates.
The quarterly survey, conducted since
Q2 2003, showed that insurance pricing
had been in soft-market decline since
Last year was the first year in which
pricing has shown continued upward
movement for more than a quarter since
2004, according to Towers Watson figures.
Thomas Hettinger, P&C sales and
practice leader for the Americas at
Towers Watson, says in a statement that
modest, aggregate increases in prices
continued throughout 2011, and more
importantly, these increases accelerated in
each quarter of the year: “We are now at a
point where we can call the pricing turn in
the market.”
Adding further evidence of a turn in
the market, Meyer Shields, an analyst for
Stifel Nicolaus, says reserve releases are
showing signs of ebbing—and insurers are
pushing rate increases that could reach as
high as 10 percent in 2012.
A review of 54 publicly reporting
insurance companies for the fourth
quarter shows that reserve releases
declined 26 percent on a year-over-year
basis, Shields says.
The total net release of $1.7 billion was
down from $2.3 billion in 2010’s fourth
quarter.
Shields’ report says that while the
$1.7 billion in reserve releases “isn’t
insignificant,” just seven insurers
accounted for 65 percent of the group’s
total reserve releases “despite contributing
surveyed companies reported
unfavorable-loss development.
While insurers reported improved
pricing during fourth-quarter conference
calls, says Shields, “few—if any—insurers
reported rate increases that currently
match or exceed claim-cost inflation.”
With the expectation that interest rates
on investments will not increase at a
rate that matches or exceeds claim-cost
inflation, insurance rates are expected to
increase even more to compensate. Shields
says rates could rise into the 10-percent
range through this year.
Carriers’ earnings will be challenged
until the rate increases flow from
current levels into earned premiums,
the report says.
Turning to personal lines, there has
been much anecdotal talk that rates have
been on the rise, and now a longtime
monitor of the commercial-lines markets
released figures giving evidence of this
overall increase.
Dallas-based electronic-insurance
exchange MarketScout, which for years
has issued a monthly indicator on the
commercial-lines market direction, has
released its first-ever personal-lines rate
barometer, indicating U.S. personal-lines
insurance rates increased by 2 percent
during the month of February.
The report says that last month:
E Homeowners’ insurance rates under $1
million in value for replacement costs
rose 2 percent.
EHomeowners’ insurance rates over $1
million in value for replacement costs
rose 1 percent.
EAutomobile insurance rates rose 2
percent.
E Personal Articles insurance (jewelry,
paintings and other valuables)
increased 1 percent.
Richard Kerr, MarketScout’s founder
and CEO, says in a statement that his
firm has an “exceptional amount of
data” on personal lines to enable it to
track data.
As it does with its commercial-lines
barometer, MarketScout uses its affiliation
with the National Alliance for Insurance
Education and Research to conduct a
survey of thousands of insurance agents,
company personnel and other professionals
attending continuing education and
designation-update institutes.
Kerr says by combining the rate data
from the exchange and the surveys from
the National Alliance, “we are able to
provide a unique, credible system for
summarizing pricing information in the
personal-lines marketplace.” NU
NUMBER OF THE WEEK:
$2,500
The minimum premium underwriters have been able to get for (very
profitable) Contractor’s Pollution
Liabilty insurance. See p. 20
