P-C Price Increases To Be Short-Lived

Any forthcoming price increases for the property-casualty commercial insurance industry will be short-lived, but personal lines rates will continue upward, according to a financial analyst.

Meyer Shields, with Stifel Nicolaus, said that while companies were heralding the rise of prices for commercial accounts during their third-quarter financial results, absent was any discussion of how long price increase will last and what the magnitude of those increases will be.

According to his analysis any price increases will not be long-term because competition for new business will remain intense. Price increases now will create excess profits once the financial markets settle down and that, in turn, will reignite the soft market.

He also noted that the rationale for increases has nothing to do with insurance pricing but external turmoil within the financial markets.

The exception will be in the personal lines area, where the competition is less intense.

Reinsurance rates are also expected to increase, and that should help global insurance brokers with reinsurance brokerage services, he continued.

“Insurer valuations have suffered along with the broader markets, and we think the sector could do well as more signs of rate increases emerge over the next few months,” Mr. Shields wrote. “Nevertheless, we think that the good news in personal lines will prove to be more sustainable than in commercial lines.”