P&C Rate Composite Down 4% At '09 Close, Says MarketScout

NU Online News Service, Jan.5, 2:39 p.m. EST

The head of MarketScout, the electronic insurance exchange, said the firm's composite rate index for property and casualty insurance was down 4 percent at the close of calendar-year 2009, but he predicted an upswing for this year.

The Dallas-based firm said an anticipated return to rate increases failed to materialize. It noted that 2009 began with composite rate reductions of minus 9 percent and had slowly moderated throughout the year to close at minus 4.

Richard Kerr, chairman and chief executive officer of MarketScout, said in a statement, "The return to rate increases will come in 2010, but the full impact will not be recognized until 2011. Of course, a cataclysmic event could change everything."

He mentioned that reinsurance rates were favorable for insurers renegotiating their Jan. 1, 2010 treaties. These favorable reinsurance terms, he said, "will help insurers continue their aggressive pricing strategies; however, in 2010 we do expect continued moderation in rate decreases."

He predicted that by the end of 2010, insurers will begin increasing rates in almost all lines of business, and "insurance brokers who are attempting to forecast the impact of rates on a diversified book of P&C business should expect a composite premium reduction of around 2 percent in 2010, excluding the impact of an increase or decrease in exposures, such as payrolls or gross receipts."

Directors and officers liability remains the only coverage that has returned to a "flat" basis for both new and renewal business. Property, general liability and workers' compensation coverages, each of which represents large blocks of premium, continue rate decreases, MarketScout found.

December rates for property and general liability were down 4 percent. Workers' compensation rates decreased 5 percent in December, the largest decrease of any line of coverage.

Insurers closed the year competing hardest for accounts from $25,000 to $250,000, with these reductions averaging minus 5 percent. By industry class, insurers were most aggressive on manufacturing and contracting risks.

MarketScout said the National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout's analysis of market conditions corroborating the firm's actual findings, which are mathematically driven by actual new and renewal placements across the United States.

Rates by coverage class were:

Commercial Property--down 5 percent

Business Interruption--down 2 percent

Business Owners--down 3 percent

Inland Marine--down 4 percent

General Liability--down 5 percent

Umbrella/Excess--down 3 percent

Commercial Auto--down 3 percent

Workers' Compensation--down 5 percent

Professional Liability--down 2 percent

D&O Liability--flat

Employment Practices Liability--down 2 percent

Fiduciary--down 1 percent

Surety--down 2 percent

By account size:

Small accounts up to $25,000--down 3 percent

Medium accounts, $25,001-$250,000-- down 5 percent

Large accounts, $250,001-$1,000,000-- down 4 percent

Jumbo accounts over $1,000,000--down 4 percent

By industry class:

Manufacturing--down 5 percent

Contracting--down 5 percent

Service--down 4 percent

Habitational--down 3 percent

Public Entity--down 3 percent

Transportation--down 4 percent

Energy--down 2 percent