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MarketScout: Soft Market Over for Workers Comp and Cat Exposed Property

Posted on 07 Apr 2011

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MarketScout's report in March shows that the composite rate for U.S. property and casualty coverages is adjusting, indicating a moderation of rate cuts. The overall composite rate measured minus 4 percent as compared to minus 5 percent the previous four months.

According to Richard Kerr, CEO of MarketScout, "We have finally broken out of the doldrums. Rates are moving. Worker's Compensation, property, business interruption, small commercial (BOP), general liability and auto rates adjusted in March."

"In prior soft market cycles, specific coverage sectors lead the market back to firmer pricing," Kerr said. "It looks like the soft market from 2005 to 2011 will end with workers' compensation and catastrophe exposed property risks leading the way out. Workers' compensation pricing has been firming for the last six months. In March, the composite rate for all 50 states was flat. Rate increases are already under way in some states. One major insurer fully abandoned monoline workers' compensation. Another, one of the largest in the U.S., ceased writing new business all together in five states and is operating under much more stringent guidelines for renewals in ten states. By August, we anticipate workers' compensation rate increases on a composite basis."

Mr. Kerr also said, "After the Japan earthquake and RMS 11, there has been considerable speculation about property rates. The composite rate for all U.S. property is down 4 percent; however, catastrophe exposed property risks are receiving rate increases of two to five percent."

As in prior months, the larger the premium of each account, the more aggressive the pricing. Small accounts experienced rate adjustments of minus 1 percent, medium accounts minus 3 percent and large/jumbo accounts (amounts exceeding $250,000) continued to enjoy average rate reductions of minus 5 percent.

General liability remained the most aggressively priced coverage at minus 6 percent, down from minus 5 percent in February. Manufacturing, service and contractor business increased slightly in premium from minus 5 percent to minus 4 percent. Energy accounts priced more competitively in February at minus 5 percent versus minus 4 percent in January. One particular insurer was primarily responsible for driving the softer market in energy casualty 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, which are mathematically driven by new and renewal placements across the United States.