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Soft Market Continues Except for Coastal Property

Source: Marketscout

Posted on 09 Mar 2010

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The composite property and casualty rate was down 5 percent for February 2010, according to Marketscout.

Richard Kerr, CEO of MarketScout profiled the current market conditions by stating, "The last six months have actually been quite consistent with rate reductions bouncing between 4 and 5 percent each month. There will always be some changes month to month but generally, we are seeing a consistent pattern of pricing in most coverage classes. However, coastal property rates in select geographic locations are firming."

Kerr further explained, "While property rates were down 5 percent on a national basis, rates for wind capacity in the Gulf Coast, Florida and the East Coast up to and including North Carolina are moderating or increasing. Admitted insurance companies in some coastal states are restricted from raising rates beyond a certain point. Some of these insurers feel they are unable to achieve a reasonable premium and are choosing to reduce their exposure because they cannot achieve "rate adequacy." In addition, several large non-admitted insurers who traditionally offer coastal property capacity are simply choosing to sit on the sideline as they wait for rates to increase.

Rumors persist there will be two new entrants in the coastal property market before July 2010. However, this new capacity will not result in rate reductions because these insurers are entering the market at a time where they hope to catch rates on the upswing. It's a pretty good bet coastal property rates are going to increase soon."

One other area of interest is the continued competition in large accounts ($250,000 to $1,000,000 premium) where rates have decreased from minus 5 percent in January to minus 7 percent in February. The competitive nature of this market segment is driven by two primary factors: (1) the large number of insurers that target this size of account and, (2) the fact exposures are down considerably. As exposures decrease so does premium. In order to hit budget projections some insurers are choosing to get more competitive on new business opportunities with accounts they feel are well managed and in a desired business class.

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 actual new and renewal placements across the United States.