Posted on 12 Mar 2010
According to the chairman and chief executive of CNA, Property-casualty insurers will need to raise rates as their combined ratios approach 110.
Tom Motamed, speaking at the CEO Panel at the Independent Insurance Agents & Brokers of America's (the Big "I") Legislative Conference & Convention in Washington, D.C., March 5, said the increases will be gradual as companies reach the “threshold of pain,” as he described the 110 point in combined ratios.
Motamed said company profits and combined ratios are healthy overall, but “growth is not there.”
While CEOs on the panel agreed that personal lines is benefiting from greater pricing discipline and gradual rate adjustments, Michael LaRocco, Fireman’s Fund president and CEO, suggested that the erratic commercial lines marketplace requires evaluation.
“There will always be some movement in cycles, but what you’re seeing in personal lines is the gradual elimination of the cycle because companies know how to match rate to risk and are able to quickly respond, raise rates and maintain profit margins,” LaRocco said. “In commercial lines, we can do much better than we are today. We have to begin to show some discipline as an industry.”
Liam McGee, chairman and CEO of The Hartford, said he agreed, adding that a continued volatile commercial lines pricing cycle could eventually hurt the industry and stall growth.
“It’s not good for underwriters, distributors or customers to have this wide range in pricing volatility,” he said. “We will see some stability with some improvement in the economy. We will see a more rational pricing environment in the long term, but I don’t think we’ll see growth rates for quite some time like we’ve been accustomed to.”