Posted on 07 May 2013 by Neilson
MarketScout has computed the April 2013 U.S. composite rate index for property, casualty and professional liability business at plus 5 percent, matching the increase from March 2013.
Commercial property and workers' compensation rates were up the most of all coverages at plus 6 percent in April. Jumbo accounts once again came into favor as the rate increases moderated from plus 5 percent in March to plus 3 percent in April.
According to Richard Kerr, CEO of MarketScout, "The market is bumping along in a continued slow but steady path towards overall increases. For the rest of 2013, we expect some months with lower composite increases than prior months but the general direction of rates will be upward, unless new capacity enters the market. The recent movements by Berkshire Hathaway could affect the market if the plan is to enter the primary property and casualty market in a meaningful way."
Kerr explained, "No one other than Berkshire and the crew of executives who just departed AIG know for sure what the Berkshire plan includes. Original speculation was they would be building a large non-admitted insurer. Some insurance company executives now speculate Berkshire may also have plans to launch a new multi-line admitted underwriting company.
"If the plan is to start a large E&S company, it could have an impact on pricing. If the plan includes an admitted primary market strategy, rates in that area could be impacted as well. Of course, all of this is speculation and the direction of rates, be it up or down, depends on what Berkshire's pricing strategy becomes. Historically, Berkshire has proven to be a very sound underwriting company so it is doubtful they will price their products inappropriately."
"In any event, the folks who moved to Berkshire are a very talented crew so we do expect their plan, once established, will draw much traction. AIG has a very large stable of talent and they have already filled the positions that were vacated with some very solid people. In the future, we believe both AIG and Berkshire will be significant players in many facets of the property and casualty market, both in the U.S. and abroad. The end result will be positive for insurance buyers, brokers and agents."
The National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis of market conditions. These surveys help to further corroborate MarketScout's actual findings, mathematically driven by new and renewal placements across the United States.