In the past year and a half, there has been a turnaround in pricing for high-valued homeowners risks, as insurers readjust after several years of strong competition in this line, MarketScout CEO Richard Kerr says.

Kerr, in a statement accompanying the latest MarketScout Market Barometer covering the month of December, notes that over the last four years, competition from newer high-net-worth insurers pressured rates. But more recently, insurers have been raising rates “to more appropriately price for the broader coverage provided,” Kerr says.

Insureds have been willing to pay for the increases thus far, he points out. In December, this translated to a 5% increase in rates for homes valued over $1 million—the largest increase for any line. Rates for homes valued under $1 million and personal articles increased by 3%, while auto was up by 2%.

Overall, Personal-lines rates were up by 3% in December compared to a year ago, unchanged from November's year-over-year increase.

Commercial lines

The New Year might not be welcoming for insurers hoping to see significant rate increases, as alternative capital will most likely continue to pressure pricing, according to Kerr.

He says, “If you are in favor of significant rate increases in 2014, you may be disappointed sans a catastrophic event or some sort of new tort-liability issue.”

Kerr notes that investors are “clamoring for decent returns in instruments not directly connected to the stock market,” and adds, “Insurance-linked securities and new-age reinsurance structures have opened the insurance market to many new investors, and, as a result, additional capacity. This added capacity may well put additional pressure on rates in 2014.”

As for December's Market Barometer, MarketScout says rates increased by 3% compared to the same month in 2012, moderating a bit from November's 4% year-over-year increase.

In December, as in November, commercial-auto rates increased the most out of any line, but while rates were up by 5% in November for this line, in December rates rose by 4%.

Crime, surety and fiduciary rates increased the least in December—up by 1%.

By account size, rates for small (up to $25,000 in premium) accounts increased the most—up by 5%. Medium ($25,001 to $250,000) and large ($250,001 to $1 million) accounts were up by 3% and jumbo accounts (over $1 million) were up by 1%.

By industry class, rates for contracting and transportation risks increased the most in December at 5%, while public-entity risks increased the least at 2%.

Special Reports /

MarketScout: Rates for High-Valued Homes Readjusting After Years of Strong Competition

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