There are no signs that the personal lines market should be experiencing dramatic upward pressure, and could be moderating thanks to increased premiums and light catastrophe season so far this year.

The latest indicator is Market Scout's barometer for July that shows personal lines rates edging down to plus 3 percent after two consecutive months at plus 4 percent.

Compared to 2012, catastrophe losses have thus far been lighter. A.M. Best recently reported P&C insurers' combined ratio dropped 2.7 points in the first quarter of this year to 94.7 as catastrophes accounted for 2 points of the combined ratio in 2013 compared to 3.2 points in 2012.

The combination of higher rates and light catastrophe losses has driven the positive second-quarter results for such insurers as Selective Insurance Group, State Auto Financial Corp. and Hanover Insurance Group.

“Generally speaking, personal lines insurers are having a pretty good 2013,” says MarketScout CEO Richard Kerr.

However, Kerr warned that hurricane season is upon us—and there is the continued threat of earthquakes or brush fires in the West, so the possibility of catastrophic events still looms on the horizon. Should there be no major catastrophes this year, Kerr believes this could be a good year for personal lines carriers and rates “will adjust downward a bit.”

Insurance Information Institute Senior Vice President and Chief Economist Steven N. Weisbart says for personal lines insurers, it still remains a struggle to keep rates profitable. For property lines, if the remainder of 2013 turns out to be a low catastrophe year, then carriers will deem rates adequate. However, a major catastrophe could change that direction.

On the casualty side, Weisbart says the cost of health care will be the major determining factor. Those rates appear to be moderating and that would translate to the benefit of carriers.

Over the long term, inflation is remaining moderate and not putting pressure on rates, he says. The auto line is one area in which premiums are increasing, but that has more to do with people buying newer model cars and thereby increasing exposure. Overall, carriers' books are healthy and they appear positioned to easily handle catastrophic losses.

“Right now, because [insurers'] surplus is in such good shape, I would say the likelihood of a hard market is fairly low,” says Weisbart.

Through June of this year, MarketScout says personal lines rates have hovered around plus-4 percent for four out of the past six months, dipping to plus-3 percent in April and February.

In July, Homeowners coverage of over $1 million in value dropped 1 point from June to plus 3 percent while Homeowners coverage under $1 million in value remained unchanged at plus 4 percent. Automobile and Personal Article also moderated by 1 point to plus 3 percent and plus 1 percent, respectively.

Special Reports /

Personal Lines Moderating; No Signs of Hardening

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