More Signs of a Hardening Market

More evidence of a hardening market has arrived via the most recent Commercial Lines Insurance Pricing Survey (CLIPS) from Towers Watson.

According to the survey, pricing is trending upward, increasing an aggregate 2 percent during the third quarter of 2011, the second straight quarter when all standard commercial lines showed an uptick in pricing. Price increases were again observed across all account sizes for standard commercial lines.

Workers' compensation pricing rose for the third-consecutive quarter, after four quarters of flat pricing in 2010. Primarily influenced by global catastrophes earlier in the year, commercial property prices increased for the second-consecutive quarter.

"The fact that prices have been moving upward for the past two quarters is a positive sign,” said Bruce Fell, managing director of Towers Watson’s property/casualty practice in the Americas. “This is an indication that pricing discipline is being maintained in the market, further underscored by the fact that nearly three quarters of P&C insurance CFOs in a recent Towers Watson survey said they believe market prices were at the bottom or turning upward.”

However, Fell noted that while rates are hardening, loss costs also continue to rise. Indeed, CLIPS data indicate loss costs increasing by 4 percent year to date, relative to 2010. “Our view is that until rate increases exceed loss cost inflation, we will not be in a market where insurance company results can improve, and we start to enter a real hard market,” Fell said.

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