NU Online News Service, June 6, 10:19 a.m.EDT

MarketScout says the composite rate for commercial insuranceplaced in the U.S. in May was up 4 percent compared to the samemonth a year ago.

In his comments on the month's rate activity, Richard Kerr,chief executive officer of MarketScout, predicts additionalincreases in pricing for jumbo accounts (more than $1 million) asinsurers self-cure themselves from what he calls the “Show PonySyndrome.”

“It's not unusual for underwriters to aggressively pricejumbo accounts because of the cache they bring,” Kerr says.“Fortune 100 'Show Pony' accounts bring bragging rights, butsometimes rates do not justify the exposure.”

Pricing for jumbo accounts was up 1 percent in May. Small andmedium accounts were up 4 percent, with large accounts seeing a 3percent increase in pricing, according to MarketScout's MarketBarometer.

“Some major insurers value Fortune 100 accounts more than theywould a spread of 100 accounts at the same premium withsignificantly lower loss ratios,” Kerr adds. “Economically, itdoesn't make sense but a few major commercial insurers areextremely aggressive when pricing jumbo accounts.”

Kerr adds that it is difficult to compare jumbo accounts tosmaller accounts because the jumbo accounts involve captives, highretentions and heavy reinsurance.

By coverage class, pricing in workers' compensation andcommercial property was up 5 percent. Pricing for business owners'policies was up 4 percent.

By industry, 4 percent increases were seen in manufacturing,contracting, habitational and transportation. Three percentincreases were observed in service, public entity and energyaccounts, says MarketScout's analysis, which is aided by a pricingsurvey conducted by The National Alliance for Insurance Educationand Research.

Commercial property and casualty rates were up 3 percent in April compared to April 2011.

PERSONAL LINES UP 2% IN MAY

The barometer for personal-lines accounts shows a 2 percent rateincrease in for May.

Kerr says rates in coastal areas are rising as wind seasonapproaches, and many admitted insurers are pulling back.

Each segment tracked—personal articles, auto, and homes valuedbelow and more than $1 million were each up 2 percent.

Kerr says, “The actual effective rate is higher than measured ona renewal vs. expiring basis because many of the new quotes do notinclude as much coverage and implement higher deductibles.”

In reporting a 1 percent rate increase for personal lines in April,MarketScout observed rate increases of 5 to 12 percent forwind-exposed areas.