Rate hikes hit 'higher gear' in Q3 driven by inflation concerns: Markel

The run-up on insurance rates may have picked up momentum through Q3 and into Q4 and, despite some unpredictability in claims inflation, should allow insurers to continue to protect margin into 2022, top officials at  Markel told an investor call.

“We sort of hit a higher gear in the third quarter,” co-CEO Richard Whitt (pictured) told the call. “One quarter doesn’t make a trend, … but it felt like the market gained back a bit of momentum in Q3.”

Talk amongst competitors that rate growth may “crested” of late could be sentiment-driven as the industry suffered Q3 one-offs on the cost side, Whitt said.

“I tend to put some of that to catastrophic events in Q3 which may have damaged earnings for some people,” Whitt said. “Some of the cat losses and the concern about inflation and social inflation might have stiffened some people’s resolve … We’ll see how the fourth quarter goes.”

Nine months year to date annual rate growth has averaged 10 percent for Markel, official claimed, with higher gains visible in casualty and professional lines and lower growth in personal and smaller retail lines.

Workers compensation is the outlier segment, with top line trends “stubbornly flat to slightly down.” Profits in the segment have remained “strong” for Markel, officials claim, but with admitted concern that margin can “move quickly” in the segment.

“At current pricing, we are cautious in terms of workers comp,” Whitt said of posture after several years of rate erosion. “We have all seen that workers compensation can move very quickly, can move quickly to profitability and can move quickly to unprofitability; we’re going to keep an eye on it for now.”

Inflation carries unknowns, with “a bout of inflation” hitting claims across segments and a litigation outlook that “seems to be swinging towards more social inflation now.”

That merits more pressure on rates.  “We need to keep our foot on the gas for rates and terms to make sure we maintain margin,” Whitt said. “I am confident we will continue to do that in 2022 … I hope we continue to see nice rate increases.”

For the market to date in 2021, Whitt is unequivocal, calling the overall rate environment “the best we’ve seen since the last hard market in the early 2000’s” with gains visible in nearly every business line. Markel posted its highest rate of premium growth YTD in the third quarter just completed, official noted.

The difference to the early 2000s hard market comes on the flood of capital on markets amid low interest rates plus heightened social inflation and an upswing in cost inflation, he noted.

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