Commercial property & auto drive business Q2 as other lines ease: CIAB

Commercial property insurance premium grew in excess of 18% in Q2 amid hesitant capacity, pushing the average premium gain across commercial lines up a notch even the majority of lines decelerated for the quarter, a quarterly survey of members at the  Council of Insurance Agents & Brokers (CIAB) has shown.

The continuing spike in US property rates tipped the scales for the average pace of commercial premium gain, which ticked up 0.1 percentage points (pps) to an 8.9% annual pace. Q2 2023 marks 23 quarters of uninterrupted rate gain. Small and medium accounts are accelerating, with growth rates of 7.2% and 9.8% respectively now visibly above ranges set in 2022.

The average increase in commercial property premiums eased to an annual rate of 18.3%, down from Q1's 20.4%, but still well above the running trend with single digit growth still possible one year ago.

A full 80% of respondents reported a decrease in capacity, frequently putting the blame on inflation, nat cat experience and a "lack of reinsurance support" as drivers of the segment's troubles.

Nat cat losses have some carriers in retreat on the segment, especially in higher-risk coastal areas, which one respondent was quoted calling “very difficult to insure in the standard markets.”

Property was not entirely alone in showing an accelerated path of premium growth. Commercial auto, general liability, flood and terrorism all broke the broader trend for rate deceleration versus Q1.

Mark commercial auto up a full 2.1 percentage points to an 10.4% rate gain in Q2, now well above the upper-single digit range in place for 2022 and putting paid to broker hopes then that a period of rate acceleration may have ended.

Cyber rates rose further, albeit the 3.6% annual rate recorded in Q2, down from an 8.4% increase in Q1, is a low dating back to points in 2019.

Additional competition and new capacity took credit for the easing. Some 40% of respondents claim an increase in capacity, up from 14% on year ago and more than double the 18% seeing a decrease in capacity in Q2.

“Success at mitigating cyber losses could be contributing to renewed interest in underwriting the line and less severe premium increases,” authors said, citing a continued decline in the portion of respondents seeing an increase in segment claims.

Elsewhere, mark D&O liability with a 1.6% premium increase, down from 3.1% in Q1. Premium growth in employment practices halved to a 2.2% annual rate. Premium growth in business interruption at 8.0% is down 1.4 points from the Q1 reading. Workers comp remains the only declining segment, down in line with the recent range at 0.7%.

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