Commercial P&C Prices Increase 7%

Commercial insurance prices have increased almost 7 percent during Q1 2013, according to “Commercial Lines Insurance Pricing Survey (CLIPS),” conducted by Towers Watson, a professional services company. This was the fifth consecutive quarter of increases across every line of business surveyed, and overall prices have been increasing for nine consecutive quarters, Towers Watson said.

Those results varied slightly from MarketScout’s monthly market barometer for May 2013, in which the average composite rate for property/casualty insurance placements in the United States increased 5 percent for the third-straight month.

“Interestingly, pricing for property grew only modestly, with less movement than might have been expected considering losses related to Hurricane Sandy,” said Tom Hettinger, Towers Watson’s property/casualty sales and practice leader for the Americas. “That is not surprising, as there is plenty of reinsurance capacity out there.”

Highlights from CLIPS:

• Price increases are decelerating; workers compensation and employment practices liability experienced the largest price increases.

• Professional liability saw modest acceleration, which drove similar increases in aggregate specialty-line price indicators.

• Small account pricing gains also accelerated, almost to the level of large accounts, which are moderating. Mid-market account price changes remained stable.

• Property coverage prices increases in the mid-single digits.

“Capacity has definitely increased for property reinsurance, as mainstream investors are joining specialists in the search for yields, specifically through alternative investments such as catastrophe bonds and collateralized reinsurance,” said Bob Betz, Florida practice leader of Towers Watson’s brokerage business. “June renewals of Florida personal lines business are an example of additional capacity significantly lowering prices on a risk-adjusted basis. We see reductions of 15 percent to 20 percent, and even more in isolated cases.”

Excluding catastrophes, loss ratios improved compared to the same period last year, as earned price increases offset reported claim-cost inflation.

“This indication builds on the estimated improvement of more than 2 percent between 2011 and 2012. The improvement comes from both earned price increases and lower levels of claim cost inflation than historically reported to CLIPS. Carrier estimates of claim cost inflation come in at just over 2 percent for YTD 2013,” Towers Watson said.