Commercial insurance rates had their smallest decline in eight quarters in the last three months of 2008 at 3 percent, and prices should continue firming this year, a consulting firm's study found.
The finding was made in Towers Perrin's most recent commercial lines insurance pricing and profitability trends survey (CLIPS).
Towers Perrin expects "that the surplus declines in 2008 will result in increased conservatism in companies' risk appetite. We believe that this, in turn, will lead to a gradual, general firming of prices throughout the balance of 2009," said Jeanne Hollister, managing principal and Americas region property and casualty insurance practice leader.
The firm said its survey found indications workers' compensation, property and large accounts may have begun to see stabilization of rates.
Towers Perrin added that pricing reductions in those areas are now generally in line with activity in other commercial lines, with the exception of specialty lines, where price changes remained fairly flat.
CLIPS data from Towers Perrin also showed that accident-year 2007 loss ratios deteriorated 7 percent relative to 2006, and that accident-year 2008 loss ratios rose an additional 12 percent versus 2007. The deterioration is a continuation of a five-year trend as, overall, prices have eased 11 percent since 2004, despite ongoing increases in loss inflation.
Ms. Hollister said the factors slowing pricing declines are an "underlying deterioration in underwriting results, coupled with unprecedented investment losses." However, she noted the industry remains strongly capitalized in the aggregate.
Towers Perin said its data is based on both new and renewal business figures–when available–obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.
Survey participants, the firm said, represent a cross section of U.S. property and casualty insurers that include many of the top 10 commercial lines companies as well as the top 25 insurance groups in the U.S.
The survey results track the differing trends in pricing across region, line of business and account size on a quarterly basis. Historically, price level and loss ratio change results vary considerably by line of business and market segment, Towers Perrin said.
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