The latest monthly MarketScout report shows that commercial property and casualty insurance rates increased at a slower rate, rising 4 percent in October, but Sandy could have a dramatic impact on rates in the future, the CEO of the Dallas-based electronic-insurance exchange says.
MarketScout cites three lines of business—property, business owners and general liability—as the major cause of the more moderate increase, as rates in these lines increased by 5 percent instead of 6 percent last month.
Making note of Hurricane Sandy, Richard Kerr, CEO of MarketScout, says, “While the composite rate may have moderated in October, we believe Superstorm Sandy will cause a month on month composite rate increase in November. It will take months before we know the magnitude of insured claims, but as time passes, the projection for insured losses continues to increase.”
The report says all lines of business remained on the increase during the month of October.
Medium-sized accounts were up 4 percent in October, down from up-6 percent a month ago. Small accounts were up 5 percent, compared to up 6 percent in September.
Large accounts were up 4 percent and jumbo accounts were up by 3 percent, both unchanged from September.
Meyer Shields, an analyst with Stifel Nicolaus, notes that the increases, while down from September, are in line with the 4 percent increases seen in May, June and July.
Of all lines of business, workers' compensation increased the most at 6 percent in October, unchanged from September.
“We see insurers' deteriorating calendar-year results as the primary catalyst for rate increases, and we expect these increases to accelerate as favorable reserve development subsides and accident-year results edge worse,” says Shields.
Turning to personal lines, MarketScout says rates remained unchanged on a month-to-month basis at up by 3 percent.
All four lines of business remained unchanged from the previous month. Homeowners insurance, under $1 million in value, was up 3 percent, while homeowners, over $1 million, remained up 2 percent. Automobile and personal articles were up 3 percent.
Kerr notes that while rates were stable for the month, there will be rate impacts from Superstorm Sandy. He says that while the National Flood Insurance Program will pick-up flood claims, insurers providing excess flood coverage will see losses.
“And of course there will be wind and fire claims,” says Kerr. “The property and loss-of-use claims are already rolling in. Couple this with the auto claims, and Sandy may have a notable impact on rates for personal insurance, particularly in the Northeast.”
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