Commercial P&C rates continue decline, Trump drives optimism

Commercial property/casualty (P/C) rates declined in the fourth quarter of 2016 across small, medium and large accounts for the eighth straight quarter, according to The Council of Agents & Brokers’ Commercial P/C Market Survey.

The average rate decrease was 3.3 percent, similar to the third quarter’s 3.2 percent decrease. Large accounts saw the largest decrease at 4.9 percent, followed by medium accounts at 3.8 percent and small accounts at just 1.3 percent.

Premium pricing saw the greatest decline throughout 2016 since decline started during the fourth quarter of 2014. However, survey respondents noted that the decrease in rates in the fourth quarter were fairly consistent with Q3 2016, signalling some stability in the market.

One broker from a mid-market firm on the east coast noted that the continuation of the soft market is no surprise, as increased competition puts downward pressure on premium pricing.

Ken Crerar, president/CEO of The Council, said: “While premium rate decreases have been steady throughout the past two years, there is normalisation in the market across most lines of businesses.

“However, commercial auto continues to harden and go against these trends.”

Many respondents said that carriers were underwriting new businesses very aggressively, often putting incumbents at an inferior position. “While renewal pricing is closer to being flat,” one broker explained, “new business pricing is more aggressive and softer.” Other carriers were writing accounts with tough losses, leading to more coverage across the board.

When asked which business issues kept them awake at night, talent management was overwhelmingly selected as the first choice. Price competition/excess capacity came next, followed by increasing cost of business (i.e. regulation, compliance, other).

Respondents also tended to be optimistic about the uncertain future within their client markets under the new Trump administration and Republican-controlled Congress. "Brokers are monitoring developments closely regarding increased federal spending on infrastructure, a shift in the corporate tax structure and any loosening of the regulatory environment, particularly in financial services and energy sectors,” said Crerar.

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