24 February 2023Insurance

P&C rates may be taming, but commercial property broke the leash: CIAB

US P&C premium growth moderated for the vast bulk of commercial insurance lines in the fourth quarter, with only a spike in commercial property rate holding the average P&C premium growth to an 8% gain, a quarterly survey of members at the  Council of Insurance Agents & Brokers (CIAB) has shown.

The 8% gain across all lines in Q4 is down slightly from the 8.1% in the prior quarter and represents the 21st consecutive quarter of increasing rates.

Premiums in commercial property increased by a sharp 16.0% on average in Q4 2022, up from an 11.2% pace in Q3 and 8.3% in Q2.

A full 89% of respondents said they had seen a reduction in commercial property capacity in Q4 2022, with 30% of those respondents describing the decrease as “significant.”

Nat cat fears plus inflating and the kick-on effect to insurance to value ratios are to blame, survey respondents claimed. Underwriters responded with higher deductibles, higher pricing, and more restrictive terms.

Remaining key lines chiefly moderated. “Signs of moderation were clearer across the various lines of business, with the majority recording average increases lower than in Q3 2022,” analysts wrote. Even umbrella coverage pricing growth dipped to single digits for the first time in twelve quarters.

Cyber fell from the rate leader board on the Q4 surge for property, the first time in seven quarters it did not lead the hardening market.

Average cyber rates fell to 15% from just over 20% in Q3 and is well off the Q4 2021 peak growth rate at 34.3%.

Reduced claims activity is helping tame cyber rates. The number of respondents reporting an increase in cyber claims has fallen almost 20% from the previous quarter, and nearly 30% from the beginning of the year.

The taming of cyber rates might also signal a certain newfound stability in underwriting discipline tied to security precautions. Prior under-pricing that led to the 2021-22 rally may be resolved, participants said.

Elsewhere in major lines: mark the price increase down 0.3 percentage points (pps) to 7.3% in commercial auto, down 0.8 pps to 4.9% in general liability, down 0.8 pps in construction to 5.4%, down 2.9 pps in D&O and down 0.8 pps to 2.8% in marine. Workers’ comp slid to a deeper 1.1% price recession.

The bulk of the overall pricing moderation was enjoyed by mid-sized firms, while large accounts suffered their third consecutive quarter of rising pricing increases, now to 9.1%, and small firms have seen steady increases of 6.3 to 6.5% over recent periods.

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More on this story

17 November 2022   Nat cat plus inflation pushes commercial property back to double-digit premium growth.
16 August 2022   Rate hikes for large accounts put paid to six-quarter moderation in rate hardening.
17 August 2023   Some 80% of brokers see a decline in commercial property capacity, some blame reinsurers.