Evidence of a market turn continues to mount, as a survey of commercial-lines executives shows rates rose 3 percent in 2011's fourth quarter—and recent analysis contends that rates could climb by as much as 10 percent over this year.

In its most recent Commercial Lines Insurance Pricing Survey (CLIPS), Towers Watson says the 3 percent rise in rates in Q4 2011 compared to Q4 2010 continues the trend of a progressive rise in rates.

The quarterly survey, conducted since Q2 2003, showed that insurance pricing had been in soft-market decline since 2004's third quarter, with slight positive growth in 2009's second quarter.

Last year was the first year in which pricing has shown continued upward movement for more than a quarter since 2004, according to Towers Watson figures.

Thomas Hettinger, P&C sales and practice leader for the Americas at Towers Watson, says in a statement that modest, aggregate increases in prices continued throughout 2011, and more importantly, these increases accelerated in each quarter of the year: “We are now at a point where we can call the pricing turn in the market.”

Adding further evidence of a turn in the market, Meyer Shields, an analyst for Stifel Nicolaus, says reserve releases are showing signs of ebbing—and insurers are pushing rate increases that could reach as high as 10 percent in 2012.

A review of 54 publicly reporting insurance companies for the fourth quarter shows that reserve releases declined 26 percent on a year-over-year basis, Shields says.

The total net release of $1.7 billion was down from $2.3 billion in 2010's fourth quarter.

Shields' report says that while the $1.7 billion in reserve releases “isn't insignificant,” just seven insurers accounted for 65 percent of the group's total reserve releases “despite contributing only about 42 percent of the group's net-earned premiums.”

The insurers were: ACE, Allstate, Chubb, Markel, ProAssurance, Travelers and CNA.

Close to 60 percent of the surveyed companies reported lower reserve releases on a year-over-year fourth-quarter basis, and 25 percent (13 out of 54) of the surveyed companies reported net unfavorable-loss development.

While insurers reported improved pricing during fourth-quarter conference calls, says Shields, “few—if any—insurers reported rate increases that currently match or exceed claim-cost inflation.”

With the expectation that interest rates on investments will not increase at a rate that matches or exceeds claim-cost inflation, insurance rates are expected to increase even more to compensate. Shields says rates could rise into the 10-percent range through this year.

Carriers' earnings will be challenged until the rate increases flow from current levels into earned premiums, the report says.

Turning to personal lines, there has been much anecdotal talk that rates have been on the rise, and now a longtime monitor of the commercial-lines markets released figures giving evidence of this overall increase.

Dallas-based electronic-insurance exchange MarketScout, which for years has issued a monthly indicator on the commercial-lines market direction, has released its first-ever personal-lines rate barometer, indicating U.S. personal-lines insurance rates increased by 2 percent during the month of February.

The report says that last month:

Homeowners' insurance rates under $1 million in value for replacement costs rose 2 percent.
Homeowners' insurance rates over $1 million in value for replacement costs rose 1 percent.
Automobile insurance rates rose 2 percent.
Personal Articles insurance (jewelry, paintings and other valuables) increased 1 percent.

Richard Kerr, MarketScout's founder and CEO, says in a statement that his firm has an “exceptional amount of data” on personal lines to enable it to track data.

As it does with its commercial-lines barometer, MarketScout uses its affiliation with the National Alliance for Insurance Education and Research to conduct a survey of thousands of insurance agents, company personnel and other professionals attending continuing education and designation-update institutes.

Kerr says by combining the rate data from the exchange and the surveys from the National Alliance, “we are able to provide a unique, credible system for summarizing pricing information in the personal-lines marketplace.”

Special Reports /

Commercial-Lines Pricing Survey, MarketScout Report Show Further Signs of Upward Market Turn

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