What's next for commercial umbrella rates in the coming months? Amid heightened competition and little movement in underlying policy trends, don’t expect the market to make waves any time soon.
Don’t expect the commercial umbrella market to make waves any time soon. Thanks to heightened competition and little movement in underlying policy trends, “the umbrella market is probably the most unchanging in 2014,” says Allison Barefoot, assistant vice president at Ames & Gough.
Pricing Trends
Commercial umbrella pricing has been “renewing the same as expiring,” says Tom Ryder, associate vice president and director of excess casualty at Burns & Wilcox, which binds and issues umbrella policies as a managing general agency for Markel. “It’s pretty much status quo, and it has been for a couple of years.”
Lately, that’s attributable in part to a reinsurance market that’s becoming increasingly more competitive, as well as an investment income landscape that’s less than ideal. “People are still dealing with balance sheet problems,” says Brian Lineberger, president of Admiral Risk Insurance Services, Inc. “The bond market just hasn’t been producing the type of results it has in prior years.”
And with both exposure increases and claims activity low in underlying policies like general liability, the result is 2014 premiums that will “either be flat or even have a slight reduction,” Barefoot says.
On the Horizon
Generally speaking, “there’s no big trend jumping out at us that would indicate this is a distressed class,” Lineberger says. But in 2014, agents should be prepared for the possibility of lower limits, particularly in surplus lines. “Carriers that have been putting up big limits in the past—they’ve been cutting that back on some of their renewals,” Lineberger explains.
And if the economy continues its upswing, prices may change accordingly. “There are a number of people who are anxiously waiting for the marketplace to harden,” Ryder says. “We’ve been in a soft marketplace for a number of years, and that translates into lower premiums and lower rates. As the economy begins to grow and improve, you may see some change in pricing at some point.”
Want tips on how to sell commercial umbrellas? Keep an eye on IA magazine's Markets Pulse e-newsletter in the coming weeks.
Jacquelyn Connelly is IA assistant editor.
