Rate gains in commercial insurance will ensure better margins into 2023: AIG

Commercial insurance rates have kept sufficiently ahead of loss cost trends to secure margin expansion into 2023, but insurers must remain vigilant in property to keep from getting nipped by inflation, officials at  AIG have claimed.

“Rate increases continued to be favorable and outpace loss cost trends in most areas of the portfolio,” Mark Lyons (pictured), AIG’s global chief actuary and head of portfolio management, told investors and analysts during the Q4 earnings call.

“With the level of rate we have achieved in just the last twelve months, we expect that margin expansion will continue at least through 2022 and into accident year 2023,” he said.

In Q4 alone, AIG secured some 10% in rate increases in its overall global commercial lines in Q4, rendering the third straight year of double-digit increases, officials bragged. “Strong momentum continued across most lines,” Lyon said. North America enjoyed an 11% rate gain in commercial, led by financial and casualty. International commercial took a 9% gain, led by EMEA and financial lines.

Select areas require continued pricing vigilance. economic and social inflation stand out as the chief “opposing forces at work.”

“Property pricing needs to remain firm to cover these increased costs of labor, materials and transportation, Lyon said. For now, recent low double-digit rate growth in property “should” deliver 2022 earned rates above loss trend after inflation, he suggested.