November Composite Rate -1%, Up From -2% in October

The November composite rate for insurers in the United States moved from minus 2% to minus 1% in November, with commercial insurance seeing the largest increases, barometeraccording to MarketScout.

“The most notable coverage classification with an ongoing consistent rate increase is commercial auto at plus 3%,” said MarketScout CEO Richard Kerr. “The commercial auto classification includes all types of commercial vehicles. Not surprisingly, the most notable industry classification with an ongoing consistent rate increase was transportation, also at plus 3%.”

The transportation classification includes trucking, hauling, buses, “and most anything with wheels,” he said. Railroads and aviation are not included in the transportation class.

“Underwriters have long struggled with commercial auto, many writing the coverage only to capture the related casualty lines such as workers compensation, general liability and excess. Many insurers consider commercial auto as a loss leader,” Kerr said.

By coverage classification, from October to November, property was down from minus 2% to minus 3%, business owners policies (BOPs) were up 1% compared to down 1%, auto was up 3% from up 2% and D&O was up 1% from flat.


By premium size, small accounts (up to $25,000) were flat in November compared to down 1% in October. Medium accounts ($25,001 to $250,000) were down 1% in November compared to down 2% in October. Large accounts ($250,001 to $1,000) saw more aggressive pricing, with rates down more in November (minus 2%) compared to October (minus 1%). Jumbo accounts (over $1 million) remained stable at minus 2%.

Insurers reversed their rate reductions for the contracting and service industries, moderating rate reductions from minus 2% in October to minus 1% in November. Manufacturing rates were flat in November compared to down 1% in October, MarketScout said.

October Commercial Composite Rate Minus 2%

For the first time this year, the composite rate—which includes all lines of commercial insurance—has decreased compared to the previous month. Octoberbarometer rates were down 2% compared to down 1% in June, July, August and September, according to MarketScout.

“Insureds and brokers should carefully examine the rates for coverage and/or industry classifications that are germane to their placements,” Richard Kerr, CEO of MarketScout, said in a statement.

By coverage classification, two large placement segments, commercial property and general liability, were down 2% in October compared to flat in September. Business owners’ policies were down 1% compared to flat in September, while commercial auto rates moderated from up 3% to up 2%. Among other lines, fiduciary, D&O, business interruption and surety were flat.

By account size, medium accounts ($25,001 to $250,000 premium) adjusted from down 1% in September to down 2% in October.

The industry classification for contractors and service companies was down 2% in October compared to down 1% in September. Energy adjusted to down 1% in October compared to flat in September, MarketScout reported.

P&C Insurers See $1.5 Billion Net Underwriting Loss in 1H

A deteriorated combined ratio seen by insurers along with slow net written premium growth contributed to net underwriting losses of $1.5 billion in the first half of 2016. Insurers’ combined ratio deteriorated to 99.8% from 97.6% in the first-half of 2015, and net written premium growth slowed to 3.0% from 4.1% a year earlier, according to a report from ISO and the Property Casualty Insurers Association of America (PCI).

The Insurance Information Institute’s Steven N. Weisbart explained:

In general, premiums may grow for any or all of several reasons. First, there is growth in the number and/or value of insurable interests (such as property and liability risks). Second, there is an increase in the willingness of buyers who had some or no insurance to purchase or add to their insurance protection, net of those who reduce or drop it. And third, there is an increase in rates (that is, the price per unit of coverage).

Net investment income dropped to $22.1 billion in the first-half from $23.4 billion a year earlier, and realized capital gains decreased to $4.4 billion from $8.2 billion, resulting in $26.5 billion in net investment gains for the first-half, down $5.1 billion from a year earlier.

Direct insured property losses from catastrophes in the United States totaled $13.5 billion in the first-half, up from $10.7 billion a year earlier—above the $11.6 billion average for first-half direct catastrophe losses for the past 10 years, according to the report.

“The industry’s results continued to worsen in the first half of the year, as insurers reported a first-half net underwriting loss for the first time since 2012 and saw their combined ratio exceed 99%,” Beth Fitzgerald, president of ISO Solutions, said in a statement. “Catastrophe losses remained higher than in previous years. Texas was hit by a hailstorm that has been described as the costliest in the state’s history, and several states in the central United States experienced severe thunderstorms. With interest rates and investment yields remaining low, insurers must find ways to improve operational efficiency while still providing valuable coverage for their policyholders.”

In the second quarter of this year, insurers’ net income after taxes fell to $8.3 billion from $12.9 billion in the second-quarter of 2015, and their combined ratio worsened to 102.1% in second-quarter 2016 from 99.4% a year earlier.

Their annualized rate of return on average surplus dropped to 4.9% in second-quarter 2016 from 7.7% a year earlier. Net written premiums rose 2.9% in second-quarter 2016 compared with 4.5% in second-quarter 2015.

June Commercial Insurance Rates Up 1%

The composite rate for commercial insurance placed in the United States rose to minus 1% in June from minus 2% in May, according to MarketScout. One of the most significant changes was rates for transportation accounts, which moved from minus 2% to plus 1%. Rates for every industry class, except habitation and transportation, moderated by 1%. Habitational rates were unchanged at minus 2%.
Industry class chart-1

Industry class list

“Insurers are getting tired of cutting rates,” said Richard Kerr, chief executive officer of MarketScout. “There are still pockets of very competitive business; however, it is beginning to look like insurers are willing to maintain the rate reductions of the past few years and not cut rates even further.”

Coverage classifications business owners policies (BOP), umbrella and professional liability all moderated by 1%, compared to the prior month. EPLI rates were up 1% and commercial auto rates moved from flat to plus 2%.
coverage class list
By account size, medium ($25,001 to $250,000) and large ($250,001 to $1,000,000) accounts moderated to minus 1% and 2% respectively. Rates remained the same for all other account sizes.

Account size