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Commercial P-C Rates Rise as Personal Lines Stabilize

The second quarter of 2020 saw rate increases in the composite property-casualty sector as well as most other sectors. Meanwhile, personal lines rate increases remained steady at 3.5%.
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Second-quarter 2020 results are in and U.S. composite commercial property-casualty rates increased to 4.8%, up from 4.5% in the first quarter of 2020.  

Rates varied in different sectors. “Almost all U.S. insurers are assessing rate increases. However, surplus lines insurers are more aggressive as rate increases for the second quarter were up 9%,” says Richard Kerr, CEO at MarketScout. “Drilling down even further, CAT-exposed surplus lines property accounts averaged rate increases of 12%.”

Directors & officers liability rates are also moving aggressively upward with an increase of “9.3% in the second quarter,” Kerr says. “This is a very volatile market—insureds with claims are seeing rate increases as high as 50%.”

Other rate hikes were seen in the business interruption market where rates increased 6% in the second quarter, up from a 4% increase in the first quarter, possibly due to concerns surrounding COVID-19 claims.

By industry group, transportation accounts continue to suffer the largest rate increases with an 8.3% in the second quarter.

Meanwhile, the 2020 second quarter composite rate for personal lines coverages placed in the U.S. held steady with a 3.5% increase, matching the rate increase for the first quarter of 2020. However, underwriters continue to assess significant rate increases for high-value homes in catastrophe-prone areas, particularly in California and Florida due to the “struggles of placing wind in Southern Florida and brush in exposed areas of California,” Kerr says.

“Many insurers are writing excess of very large deductibles, if at all,” Kerr says. “Insureds are balking at some of the huge rate increases and as a result, there are probably more self-insured high valued homes in the U.S. today than at any time in the past forty years.”

In addition to rate increases, underwriters are diligently assessing the exposure impact of COVID-19 with respect to insureds with multiple homes. “We anticipated insurers would be wary of covering secondary homes because of the lack of attention they would receive. If you can’t travel and everyone is on lockdown, the assumption was secondary homes would not be monitored as closely and small maintenance items may create large claims,” Kerr says.

“However, we may have gotten it backward, at least for the summer of 2020. The majority of homeowners have retreated to their secondary home in the mountains or on the beach to wait out COVID-19. So, the primary residence may be more exposed rather than the secondary,” he adds.

In the second quarter of 2020, homes under $1 million saw rate increases of 3.3% while those over $1 million saw increases of 4%. Notable exceptions were, of course, in CAT-exposed areas of California and Florida where rate increases range from 7% to 20%. Additionally, automobile rates increased 4% and personal articles and fine arts experienced rate increases of 2.7%.

MarketScout is a national MGA and wholesale broker specializing in assisting agents in placing high net worth personal lines business.

Monday, July 13, 2020
Commercial Lines