Pressure on rates is likely to continue in the coming quarters as the property and casualty industry remains flush with cash, according to a recent analysis.
ALIRT Insurance Research, in its “Year End 2013 P&C Industry Review,” says its composite of insurers has seen financial strength move “sharply higher” to 2006-2007 levels. ALIRT says, “This is not a financial environment that is traditionally conducive to hard-market pricing, as strong balance sheets usually provoke greater pricing competition among carriers.”
The firm says insurers have pointed to low interest rates, volatile weather and “implicitly, the slowly evaporating benefit of prior-year reserve redundancies” when justifying higher rates. But ALIRT contends that while these factors are defensible to a certain degree, “we wonder how long they will be viewed as valid by insurance brokers/buyers given the industry's underlying balance-sheet strength coupled with anemic demand vis-à-vis current capacity.”
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