While the Market Barometer composite rate index for property and casualty insurance was down 4 percent at the close of calendar-year 2009, the head of the electronic insurance exchange that produces the monthly price report predicted an upswing by the end of this year.
Dallas-based MarketScout said an anticipated return to rate increases failed to materialize last year. However, 2009 began with composite rate reductions of 9 percent, only to slowly moderate throughout the year to close at an average decline of 4 percent in December 2009.
"The return to rate increases will come in 2010, but the full impact will not be recognized until 2011," according to Richard Kerr, chairman and chief executive officer of MarketScout.
"Of course, a cataclysmic event could change everything," he added.
Mr. Kerr noted that reinsurance rates were favorable for insurers renegotiating their Jan. 1, 2010 treaties. (See pages 6 and 7 for a full report on reinsurance renewals.)
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, the barometer survey found.
Rate decreases continue for property, general liability and workers' compensation coverages, each of which represents large blocks of premium, MarketScout found.
December rates for property and general liability were down 4 percent. Workers' comp rates fell 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 in premium, with reductions for those accounts averaging 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 findings, which are mathematically driven by actual new and renewal placements across the United States.
The average rate changes by coverage class were as follows:
- 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' Comp–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, the average rate declines were:
- Up to $25,000 in premiums–down 3 percent
- $25,001-to-$250,000–down 5 percent
- $250,001-$1 million–down 4 percent
- Over $1 million–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
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