KBW expects pricing outside of property catastrophe to continue decelerating, justified by improving core-underwriting margins—but the firm says soft interest rates and inadequate return-on-equity levels should keep increases “modestly positive” over the next 12 months. Moody's likewise says it expects commercial-line rate increases to slow further, but to remain above the trend in loss costs for the rest of the year.

“Based on commentary from the insurers' quarterly earnings calls, commercial-rate deceleration is trickling down from large property accounts to middle market accounts as carriers push for greater retention, now that a majority of their business has achieved rate adequacy,” Moody's analyst Ji Liu says in a statement. “Still, the competitive environment remains rational as the most challenging lines such as commercial auto and workers' compensation command further rate increases.”

Drilling down into specific lines, KBW says rate increases in specialty appear to be more modest than in the recent past; homeowners' rates appear set to decelerate at a faster pace over the next 12 months; and property catastrophe “is nearly in free fall.”

Personal auto “feels more competitive within the independent-agency channel,” says KBW. Moody's says the line is experiencing competitive pressure as direct writers continue to gain market share and large agency writers compete on price to pursue growth again in 2014.

On industry reserves, KBW says it believes 2013's “prominent reserve implosions” are company-specific, rather than a broader shift in reserving practices. The firm says that in Q1 2014, commercial-focused insurers, excluding AIG, experienced a 13.4% year-over-year increase in net-favorable development.

Looking at the reserve performance for these insurers from Q1 2011 to Q3 2013, a KBW chart shows a downward trend in the number of companies reporting less-favorable development and adverse development. In Q4 2013, the trend appeared to reverse, with the number of companies reporting less-favorable development climbing from 30% to 54%, and the number of companies reporting adverse development rising from 8% to 17%.

But in Q1 2014, the numbers dropped again to 29% reporting less-favorable development and 10% reporting adverse development. KBW says, “While Q1 2014 is simply one data point, it's nonetheless a data point that's contrary to Q4 2013's brief trend departure—and one that perpetuates the longer-than-expected streak of favorable reserve development in light of what's been a remarkably benign loss-cost environment.”