Commercial insurance prices increased by 5% in aggregate in2013's third quarter, says Towers Watson, but the risk consultantforecasts the hardening trend will taper.

Data from the Towers Watson Commercial Lines Insurance Pricing Survey (CLIPS), obtainedfrom 43 insurers representing about 20% of the U.S. property andcasualty commercial-insurance market, shows the Q3 increase follows11 consecutive quarterly price hikes.

However, aggregate pricing dropped by a point since the sameperiod last year.

Prices increased by about 6% from the second quarter of 2011 tothe second quarter of 2012. The rate of increase stayed flat atabout +6.5% through this year's second quarter, but then dropped byabout a point by the third quarter of 2013.

“This hard market is somewhat different from hard markets wehave experienced before,” says Tom Hettinger, Towers Watson'sP&C sales and practice leader for the Americas.

“Carriers are taking rate, which is logical, as they focus onmeasuring the capital required to support the business rigorouslyand realistically, and adjust their return expectationsaccordingly.”

Employment practices liability experienced the largestyear-over-year price increase.

Price increases across all lines were smaller compared to theprior quarter, except for EPL. Mid-market accounts had higher priceincreases than large and small commercial accounts, and specialtylines prices increased at a lower rate than standard lines.

Loss ratios are “benign”, says Hettinger, as the change inearned loss ratios between accident years 2012-2013 have fallen byabout 6%, a 1.5% improvement since the Q3 2011- Q3 2012 reportingperiod.

Still, says Hettinger, “the explicit recognition of risk,whether in the form of investment yield, inflation risk orcatastrophe exposure, seems to be leading to much more disciplinedpricing decisions.”