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MarketScout: Rates Continue Moderation Course

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Posted on 05 Aug 2011

After three consecutive months with the composite P&C rate measuring minus 4 percent, the U.S. property and casualty market moderated in June, with July rates dropping an average of 2% compared with the same period last year.

The last time the composite rate for U.S. based property and casualty accounts moderated for three consecutive months was October 2005. May 2011 rates were down 4 percent, June down 3 percent and July is down 2 percent.After almost six years, a pattern of consistent moderation in insurance pricing has occurred. The trend towards rate moderation and in some categories, rate increases, further supports the position the market has bottomed out and is finally beginning a slow correction.

Workers' compensation rates continued to lead U.S. insurers out of the soft market with rate increases of 2 percent in July.

Workers' compensation rates vary by state and are impacted by local variables. One large insurer recently left the monoline workers' compensation market and another is not accepting new business in Colorado, Georgia, Oregon or Pennsylvania. These movements are impacting pricing in those states.

Property rates moderated to minus 2 percent for all classes of property combined. Richard Kerr, CEO of MarketScout commented, "While the composite property rate is down 2 percent, catastrophe exposed property rates are up 3 to 4 percent. Because of losses already sustained by property reinsurers, the impact of the 2011 hurricane season could play huge in property rates for the next 12 months."

By industry class, energy experienced the greatest adjustment moderating from minus 5 percent to minus 3 percent. Kerr commented, "One of the larger energy insurers recently posted poor results and as a result they may be reigning in some of their more aggressive underwriters. Further, some energy MGAs [managing general agent] are being more closely monitored by their insurer partners to assure proper underwriting and pricing parameters are followed. These events may well be the reason for the notable moderation in energy rate decreases."

Jumbo accounts enjoyed the most competitive rates at minus 4 percent. Small accounts, those under $25,000, encompass a very large portion of the overall market. The rates for small accounts increased 1 percent, offsetting the 2 percent to 4 percent decreases developed by the medium to jumbo accounts.

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.


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