US commercial property rates unhitch Q1 as capacity pulls away: CIAB

Commercial property rates spiked in the first quarter in excess of 20% amid declining capacity, bucking a commercial insurance rate trend that saw growth moderate for the vast bulk of lines, 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 rate gain, which ticked up 0.9 percentage points (pps) to an 8.3% annual pace. Q1 2023 mark 22 quarters of uninterrupted rate gain.

The average increase in commercial property premiums spiked to 20.4%, the first over-20 reading since 2001. A full 85% of respondents reported a decrease in capacity, frequently putting the blame on inflation and nat cat experience as drivers of the segment's troubles.

In addition to that increase in claim severity, frequency is also a concern: 61% of survey respondents claimed a Q1 2023 increase in commercial property claims, more than for any other line. As with severity, weather-related events are often said to blame.

Property was not entirely alone in showing an accelerated path of premium growth. Commercial auto, business interruption, construction and marine all had premiums rising at a faster annual rate than seen in late 2022.

Mark commercial auto up a full percentage point to an 8.3% rate gain in Q1, putting paid to hopes for stabilization when Q4 2022 had seemed to cap a period of rate acceleration.

Growth rates in business interruption and construction were up 2.7 pps and 2.4 pps to 9.4% and 7.8% respectively. Rates in marine gained more modestly to a 3.9% growth pace.

Premium increases slowed significantly for cyber lines to an average annual increase of 8.4%, down from 15.0% the previous quarter or from the 34% peak observed just over a year ago.

Elsewhere, mark workers comp at 0.5% annual rate erosion, an improvement on a 1.1% decline in Q4 2022 but still well within an established range.

Rate growth in general liability is slowing, now to a 4.6% annual pace in Q1 as it comes off a Q3 2022 local peak.

Across the full spectrum of insurance lines, rate growth on large accounts at 11.4% outpaced movement visible elsewhere on the corporate spectrum, quickly taking a 2.4 percentage point premium to mid-market versus a 1 point growth rate deficit just one year ago.

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