As losses mount, insurance companies and their reinsurers continue to assess rate increases across all lines of coverage and industry groups.
As losses mount, insurance companies and their reinsurers continue to assess rate increases across all lines of coverage and industry groups. The composite rate increase for the first quarter of 2022 was 6%, rising from 5.8% in the fourth quarter of 2021, according to MarketScout.
“Rates in January and February were consistent with what was reflected in the last quarter of 2021," commented Richard Kerr, CEO of MarketScout. “However, rates did start to move up even more in March 2022, which could be the beginning of stronger increases for the next several quarters."
Rates for almost all homeowners across the U.S. increased in the first quarter of 2022, regardless of the geographic location or value of the home. For homes below $1 million in value, rates increased 5.3% in the first quarter of 2022, compared to just 3.7% at the end of 2021. For homes over $1 million in value, rates increased 7% in the first quarter of 2022, rising from a 6.3% increase at the end of 2021.
Meanwhile, personal articles rates are increasing—rising to a 4% increase at the end of the first quarter of 2022 compared to a 3% increase at the end of 2021. Personal auto rates are also increasing, albeit at a relatively stable 4.3% in the first quarter of 2022 compared to the end of last year.
Through the rest of 2022, “we expect homeowners rates across the U.S. to continue to increase," Kerr said. “What used to be considered relatively benign catastrophe prone areas of the US are now experiencing more and more claims. Further, several major insurers are dramatically cutting back their appetite for tough-to-place homes. This will impact the availability of coverage and result in significant rate increases or coverage restrictions for many homeowners whose insurer will issue a notice of non-renewal."
Kerr added that managing general agents (MGAs) and brokers “are scrambling for capacity. The exit by these insurers will accelerate the formation of new capacity providers and insurers," he said. “In the meantime, rates are going to increase considerably for the tough-to-place homes; perhaps as much as 35%."
In commercial lines, MarketScout illustrated that rates are increasing too. When measuring rates by coverage classifications, rate increases were most aggressive in the first quarter of 2022 for cyber, umbrella and directors & officers, rising 19.7%, 9.7% and 8.7% respectively.
By industry classification, transportation (10.3%) and habitational (8%) rates increased the most. Meanwhile, small and medium-size account rates moved up to 5.3% and 6.3% respectively while large and jumbo accounts remained steady at an increase of 6.7%.
Will Jones is IA editor-in-chief.