Moody's reports its rated commercial lines insurers are indicating a reduced appetite for risk.
According to a survey by the rating agency, insurers “continue to indicate a moderate decline in risk appetite for 2013 for the commercial liability lines despite improving combined ratios.”
Moody's concludes rate increases will continue in 2014 but the size of the increases are expected to “slowly taper off” given plentiful capacity in the marketplace, and as companies improve returns on capital.
Rates in commercial property, for instance—after three years of rate increases—are slowing.
The lack of risk appetite in workers compensation isn't as marked as the early part of the decade, says Moody's, but there is a moderate decline.
Profit in the four major commercial liability lines—workers' compensation, general liability, professional liability and auto—is expected to significantly improve in accident-year 2013 and 2014 if rate and loss trends continue and exposure growth become visible.
Commercial liability lines insurers see rate increases of about 7.5 percent in 2013—up from an increase of 6.5 percent in 2012 and 2.5 percent in 2011.
The rating agency can see a combined ratio of 101 in AY 2013 and a profitable 96.5 in AY 2013 after combined ratios of 105.5 and 108.5 in AY 2012 and 2011, respectively.
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