Early Q2 rate consensus: less lift, but very little altitude lost
The market hardening is likely past its peak, but sufficient unknowns have taken hold of the market to prevent any major cut to the pace of rate gains, industry leaders have indicated in the first days of the Q1 earnings season.
“We are probably past the peak, but it is coming off very gradually …. probably more gradually than I would have predicted a few quarters ago,” the co-CEO of Markel, Richard Whitt (pictured left), told his company’s Q1 earnings call.
“It’s been a very gradual gentle glide,” Whitt said.
Chubb CEO Evan Greenberg (pictured right) likes the phrase “glide path” for the current market trend, suggesting a strong dose of market balance, albeit between sometimes volatile elements.
“’Glide path’ – I think that’s right; rates will continue to moderate, but with an asterisk that it depends on the line of business and on the loss cost environment,” Greenberg told his company’s Q1 earnings call.
Rates may entice competition, but conditions don’t look right for a massive influx of new capacity to capitalize on the accumulated rate gains from the ongoing hardening market, Whitt indicated.
Markel sees “some impact on margin” from select cases of increased appetite on the market. “I think that after 3-4 years of rate increase, peoples’ assessment of rate adequacy changes, so their appetite changes,” Whitt said.
Chubb sees “a fairly orderly marketplace, but it is a market place, and we know a marketplace always has a certain signature of chaos to it and that is baked into our thinking,” Greenberg said. A “little rate give-back” is “natural” when rates run above requirement, he admitted.
But competitive pressures run within clear limits being set daily by growth and inflation concerns and nerve-racking geopolitical tensions.
“There are enough things out there to give people pause,” Markel’s Whitt said, citing recession fears, a broad list of inflation drivers, market volatility and the Russian invasion of Ukraine.
Upward rate pressure will be consistent where required, Chubb’s Greenberg argued. “As loss costs show themselves or the spectre arrives on your doorstep, the industry does respond,” Greenberg said, citing examples from cyber and property cat amongst others.
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