According to MarketScout’s Market Barometer, the fourth quarter 2022 composite rate for U.S. commercial insurance was up 5.1%.
The Dallas-based distribution and underwriting company said property insurance “remains a challenge,” with fourth-quarter increases totaling 9.3%. Some catastrophic-exposed properties have been estimated for increases as high as 24% to 30%, MarketScout added.
Q4 2022 Commercial rates per cover
Commercial real estate: +9.3%
Business interruption: +3.7%
BOB: +5%
Inland shipping: +3.7%
General Liability: +6.7%
Umbrella/Excess: +7.7%
Commercial Auto: +7%
Workers Compensation: Fixed 0%
Professional liability: +5.3%
D&O Liability: +6%
EPLI: +6.3%
Fiduciary: +2.3%
Crime: +2%
Certainty: +1.3%
“On January 1, 2023, real estate cat reinsurance renewals were completed, except in cases of poor underwriting and sustained losses,” said Richard Kerr, founder of MarketScout. “Stricter conditions were imposed on almost everyone. The trickle-down will have a notable effect on the earnings of MGAs in real estate and program managers due to lower base commissions.
January renewals see the toughest real estate catastrophe reinsurance rates in generation
Last November, MarketScout was acquired by general agent Novatae Risk Group. Kerr was named CEO of Novatae.
Cat-exposed properties also topped MarketScout’s Market Barometer for personal lines, which remained relatively stable overall with a 5.2% increase in the fourth quarter. However, Kerr noted, “Catastrophe-prone areas, such as wildfire zones in California and wind-exposed sites in Florida, are rated with higher rate increases, sometimes as high as 30% to 40%.
“Reforms recently passed by the Florida legislature may help moderate rate increases for all Florida homes, but any home exposed to the wind will still experience rate increases,” he added.
Personal car is also on the rise, with a compound increase of 5% in the last quarter of 2022.
Going back to commercial lines, MarketScout said cyber insurance rates are moderating, but still came in at plus 20% in the fourth quarter.
Kerr said additional moderation in overall commercial rates could come if there is an economic slowdown or if interest rates continue to rise.
“In the early 1980s, insurers counted on interest income on premiums received, known as cash flow underwriting,” explains Kerr. “This concept was especially applied to longer tail accident lines that have slower and longer claims payouts. As insurers were responsible for the higher income from interest payments on premiums paid, rates were revised downwards. No doubt an insurer could write at a combined loss ratio of 100% because the interest they received on premiums written was 12% to 20%. We are still a long way from interest rates at those levels, but even at 5% it will have a positive impact on some insurers’ ROI, possibly resulting in a moderation of rate increases.”
The Market Barometer is based on a pricing survey by the National Alliance for Insurance Education and Research.
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