P&C Market Rates Down 6%; Reductions Lessen

MarketScout insurance exchange reported that the U.S. property and casualty market remained soft, as rate declines for risk placements continued moderating at a slow but steady pace.

The composite rate index for June 2009 was minus 6 percent compared to minus 11 percent for June 2008.

Richard Kerr, chief executive officer of Dallas-based MarketScout, said that "June renewals show rate declines that continue to moderate, with many insurers waiting to determine how the July 1 reinsurance renewals will impact capacity."

According to early reports, MarketScout is finding capacity for coastal property decreased and property catastrophe capacity in general is going to be tougher to secure.

Mr. Kerr noted that a decision by Berkshire Hathaway to curtail property catastrophe capacity has led to some speculation about the company's motives.

The question, he said, is "whether the company is trying to avoid losses and the resulting pressure on their balance sheet, or simply limiting capacity anticipating higher rates."

Mr. Kerr advised that "smart insurers are retaining their capacity until sensible risk return ratios are available," and "poor underwriting results are pending for some major insurers. Expect significant market movement in the next twelve months with clear winners and losers."

MarketScout calculates the U.S. p&c market condition by analyzing data amalgamated at its insurance exchange (www.marketscout.com) and via in-person surveys conducted by The National Alliance for Insurance Education and Research.

By coverage class, all classes either remained the same or moderated further with the exception of workers' compensation, which changed from an average rate reduction of minus 7 percent in May to minus 8 percent for June.

By industry class, contractors were the only class of business that experienced further rate reductions as compared to the preceding month. By account size, small accounts moderated the most at an average rate reduction of minus 4 percent.

Among industry classes, the firm said workers' comp at 8 percent had the steepest rate decline. General liability was down 6 percent. A 5 percent decrease in rates was recorded for commercial property, umbrella excess, professional liability and business owners policy.

A 4 percent reduction was listed for inland marine, commercial auto, employment practices liability, crime and surety. Directors and officers liability and fiduciary were down 3 percent.

By account size, jumbo accounts over $1 million were down 7 percent; large accounts (from $250,000 to $1 million) and medium accounts ($25,001 to $250,000) were both down 6 percent, while small accounts (up to $25,000) were down 4 percent.

Rates for industry class were down 7 percent for contracting; 6 percent for manufacturing and service sectors; and 5 percent for habitational, public entity, transportation and energy.