While experts point to signs of recovery, property/casualty insurers are still mired in a soft market. According to research released yesterday by
“The last six months have actually been quite consistent with rate reductions bouncing between 4% and 5% each month," says Richard Kerr, CEO of MarketScout. "There will always be some changes month-to-month but, generally, we are seeing a consistent pattern of pricing in most coverage classes. However, coastal property rates in select geographic locations are firming.”
Kerr goes on to explain the despite the 5% drop in property rates nationwide, rates for wind capacity in the Gulf Coast, Florida and the East Coast up to and including North Carolina are moderating or increasing. Additionally, admitted insurers in some coastal states are restricted from raising rates beyond a certain point.
"Some of these insurers feel they are unable to achieve a reasonable premium, and are choosing to reduce their exposure because they cannot achieve 'rate adequacy,' he adds, while several large, non-admitted insurers that traditionally offer coastal property capacity sit on the sidelines waiting for rates to increase.
MarketScout reports rumors persist that there will be two new entrants in the coastal property market before July 2010. However, electronic insurance exchange believes this new capacity will not result in rate reductions because these insurers are entering the market at a time where they hope to catch rates on the upswing.
Another area highlighted by MarketScout is the continued competition in large accounts ($250,000 to $1,000,000 premium), where rates have decreased from -5% in January to -7% in February. The company says competitive nature of this market segment is driven by two primary factors:
1. The large number of insurers that target this size of account.
2. The fact exposures are down considerably. As exposures decrease so does premium. In order to hit budget projections some insurers are choosing to get more competitive on new business opportunities with accounts they feel are well managed and in a desired business class.
