Possible New Capacity Could Impact Market says MarketScout
April saw the composite rate index increase again for the property, casualty and liability business.
“The market is bumping along in a continued slow but steady path towards overall increases.” says MarketScout CEO Richard Kerr. “For the rest of 2013, we expect some months with lower composite increases than prior months but the general direction of rates will be upward, unless new capacity enters the market.”
In particular, commercial property and worker’s compensation led the pack with rates increasing plus six percent last month. Jumbo accounts also saw a more moderated rate increase from plus five percent in March to plus three percent in April.
A look at the numbers by Coverage Class
|By Coverage Class||Rate Increase|
|Commercial Property||Up 6%|
|Business Interruption||Up 3%|
|Inland Marine||Up 3%|
|General Liability||Up 4%|
|Commercial Auto||Up 5%|
|Workers’ Compensation||Up 6%|
|Professional Liability||Up 3%|
|D&O Liability||Up 3%|
A look at the numbers by Account Size
|By Account Size||Rate Increase|
Up to $25,000
A look at the numbers by Industry Class
|By Industry Class||Rate Increase|
|Public Entity||Up 4%|
The recent movements by Berkshire Hathaway and the impact it will have on the marketplace remains to be seen
On April 26, 2013, many news outlets reported that Berkshire Hathaway had lured four top executives from AIG. In commenting on the recent events, MarketScout CEO said adopting a wait-and-see approach is best until Berkshire Hathaway reveals what its actual plans are. “The recent movements by Berkshire Hathaway could affect the market if the plan is to enter the primary property and casualty market in a meaningful way,” says Kerr. “No one other than Berkshire and the crew of executives who just departed AIG know for sure what the Berkshire plan includes,” explains Kerr. “Original speculation was they would be building a large non-admitted insurer. Some insurance company executives now speculate Berkshire may also have plans to launch a new multi-line admitted underwriting company.
“If the plan is to start a large E&S company, it could have an impact on pricing. If the plan includes an admitted primary market strategy, rates in that area could be impacted as well. Of course, all of this is speculation and the direction of rates, be it up or down, depends on what Berkshire’s pricing strategy becomes. Historically Berkshire has proven to be a very sound underwriting company so it is doubtful they will price their products inappropriately.
“In any event, the folks who moved to Berkshire are a very talented crew so we do expect their plan, once established, will draw much traction. AIG has a very large stable of talent and they have already filled the positions that were vacated with some very solid people. In the future, we believe both AIG and Berkshire will be significant players in many facets of the property and casualty market, both in the US and abroad. The end result will be positive for insurance buyers, brokers and agents.”