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After Years of Decline, Commercial Insurance Rates See Significant Uptick

by Precise Leads

March 16, 2018

Insured losses from last year’s natural disasters drove up commercial insurance rates in the U.S., worldwide.

Driven by last year’s succession of major hurricanes and wildfires, global commercial insurance rates surged in the fourth quarter of 2017, reversing a downward trend that began in the first quarter of 2013. A recent report from Marsh revealed that average commercial insurance prices rose by 0.8% in Q4, a significant turnaround from the 1.9% drop in the previous quarter.

The rise was particularly evident in the U.S. property insurance market, where insured losses from natural catastrophes pushed pricing up by 3.6%. Worldwide, property insurance rates rose an average of 3.2% in the fourth quarter, up from a 2.4% decrease in the third quarter.

How Other Sectors Fared

While commercial insurances rates rose in general last year, some major lines did register decreasing rates. According to Marsh, an ongoing worldwide decline in casualty insurance rates slowed only slightly in the fourth quarter, when the sector followed a 1.7% slump in the third quarter with a 1.5% downturn in Q4. In the U.S., casualty insurance rates fell by 2.8% in the fourth quarter, an increase over the 2.4% decline seen in the previous quarter.

Better results were seen in financial and professional (FinPro) lines of insurance, which went from a 1.4% fall in pricing worldwide in the third quarter to a 0.1% increase in the fourth. In the U.S. FinPro, however, the same rates fell by 1.6% in the fourth quarter, although that represented an improvement from a 2.7% plunge in the third quarter.

Marsh’s U. S. composite insurance pricing index suggests that rate declines are beginning to stabilize. The firm reports that average pricing shrunk by 0.6% in Q4, compared to a much deeper cut of 2.9% in Q3. In one sector, the U.S. even saw rate hikes. Perhaps due to an increased focus on criminal hacks and the frequency of those attacks, cyber security premiums rose for the first time since the fourth quarter of 2016, climbing by 0.6% in the fourth quarter of last year.

Good Outlook for Commercial Insurance

Marsh’s research reinforces A.M. Best’s recent upgrade of the commercial insurance sector’s outlook from negative to stable. A.M. Best cited improved risk management practices and healthy reserves for its revised rating.

IVANS further echoed Marsh’s findings regarding commercial property insurance in the U.S. in its February index of premium renewal rates. Rates in that sector rose 3.22% during the month, building upon the 3.06% leap in the prior month. Commercial auto insurance renewal rates shot up even higher, rising from 4.3% at the end of January to 4.43% in February — not surprising in light of the recent overall increase in auto insurance rates.

General liability, business owner’s policy (BOP), and umbrella insurance all logged upticks in renewal rates, as well, though they weren’t quite as sharp as the gains these lines recorded in January. General liability renewal pricing was up 1.82% compared to a 1.98% rise in January, while BOP insurance rates rose 3.8% in February, slightly below January’s 3.91% increase. Umbrella rates increased by 1.07% in February, down from the 1.26% hike in January.

Worker's compensation, meanwhile, lagged behind other sectors. Renewal rates in that category continued their downward slide, dipping 3.61% in February after a 1.01% drop in January.

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