Prices for commercial property/casualty slipped again in the 2nd quarter of 2014, according to The Council of Insurance Agents & Brokers' quarterly Commercial P/C Market Index Survey.
On average, prices for small, medium and large accounts eased by a modest -0.5 percent during the second quarter, compared with 1.5 percent in the first quarter, as shown in the charts prepared by Barclays Research, based on The Council’s survey data.
“The commercial market continued along the same path as it travelled in the first quarter,” says Ken A. Crerar, president/CEO of The Council. “Pricing responded predictably to strong competition and plenty of capacity to underwrite most commercial lines. As for the second half of the year, it will depend on the usual factors – catastrophe losses, profitability and capacity,” says Crerar.
According to the survey results, competition continued to drive the market. Brokers across the country reported that carriers were aggressive on new business, but overall willing to negotiate terms and conditions and/or price to keep good business on the books. One broker in the Northeast reported, “The trend of more competitive underwriting continued, especially with new business.” From the Midwest, “New business became more competitive with very possible premium reductions for an average to good account.” And in the Southwest, a broker responded, “Pricing is becoming noticeably more competitive on all account sizes.”
Of note, pricing for property fell into negative territory with a -2.6 percent drop last quarter compared with flat pricing in the first quarter. As a broker in the Northeast said, “the property market was very soft with lots of capacity.” Large property accounts in the Southwest were “softening” as well. Overall construction risks were flat across most of the country, but “dropping” in the Southwest, a broker reported. A Northeast broker also said there was an abundance of capacity for catastrophe risks.
Although workers’ compensation prices fell off a bit, it continued to be a challenge for most regions. For example, in the Pacific Northeast a broker said, “Worker’s compensation went up 30-to-50 percent.” A Southwestern broker said, “Any negative loss experience in workers’ compensation resulted in significant rate increases.”
A broker in the Southeast summed up last quarter best: “Some up, some down. If an account had loss issues, you’re more likely to see premium increases.”
Finding and keeping good talent has moved up as the main concern on brokers’ minds with 75 percent of brokers placing it at the top of the list. The cost of doing business – regulation and competition –came in at 40 percent, while the concern over health care reform dropped to fourth place.
Over half the brokers responding see the lack of political leadership in the country continuing as a major problem. Other challenges include the economy and the lack of jobs, along with the impasse over federal budget and deficit issues.
CIAB’s survey is the oldest source of commercial property-casualty market conditions, pricing practices and trends, dating back to 1999.
CIAB, P&C, property, casualty, pricing, Ken A. Crerar