December 2014
Market Barometer
(Released January 2015)
After Months of Slow and Steady Rate Moderation,
CompositeRateforDecember2014isFlat
SoftMarketCycleExpectedtoStartinEarly2015 "We are on the cusp of a soft market," noted Richard Kerr, CEO of MarketScout. “Throughout
2014,thecompositeP&CrateslowlydriftedtowardsrenewingasexpiringandinDecemberwe
finallyhitthatmark.Historically,themovetosofterratesisinlinewithpriormarketcycles.We
begantrackingcommercialP&CinsuranceratesinJuly2001,inthemidstofahardmarketcycle
thatended43monthslater,inFebruary2005.InMarch2005,themarketturnedsoft,registering
the first composite premium reduction at minus 1 percent. That soft market cycle lasted until
August 2011, 78 months – six and half years. In November 2011, we entered another market
cycle of increasing premium rates. The rate increases
were not as dramatic in prior cycles; they were steady
andsensible.After37months,therateincreasesappear
to be over. The next soft market will start as soon as a
composite rate decrease is measured. We expect the
beginning of the next soft market cycle to be in early
2015.”
Trying to determine the length of market cycles is like
forecasting interest rates, but Kerr explained, “It’s
coming – and soon. We don’t expect the aggressive
pricing which occurred in the last soft market cycle of
2006to2011,nordoweexpectanother70monthcycle;
however, smart companies will be prepared for a
changing rate environment. If you budgeted for
increasesinratesin2015,youbestchangethatportion
ofyourbusinessplannow.Wesuggestplanningforslightratedecreasesbeginningattheendof
© 2015 Insurance & Risk Management Knowledge Alliance
The National Alliance for Insurance Education & Research
December 2014
Market Barometer
(Released January 2015)
thefirstquarterandslowlyincreasingtoareductionof4to5percentbytheendof2015.The
good news is the rate decreases should be largely offset by increased exposures related to
economic growth in 2015. Insurers will be covering greater exposures, so the benefit forthem
may be offset by more claims. Intermediaries will enjoy increased revenues as their insureds
grow. This additional revenue will help balance out the revenue reduction as a result of lower
rates.”
By coverage classification, rates for all coverages were down 1 percent with the exception of
EPLI, which remained at plus 2 percent. As measured by account size, medium and large
accountsadjusteddown1percentand0percentorflatrespectively.Byindustryclass,allwere
down 1 percent from last month with the exception of transportation, which was down 2
percent.
TheNationalAllianceforInsuranceEducationandResearchconductedpricingsurveysusedin
MarketScout's analysis of market conditions. These surveys help to further corroborate
MarketScout'sactualfindings,mathematicallydrivenbynewandrenewalplacementsacrossthe
UnitedStates.
AsummaryoftheDecember2014ratesbycoverage,industryclassandaccountsizeissetforth
below.
© 2015 Insurance & Risk Management Knowledge Alliance
The National Alliance for Insurance Education & Research
December 2014
Market Barometer
(Released January 2015)
ByCoverageClass
CommercialProperty
Up0%
BusinessInterruption
Up0%
BOP
Up1%
InlandMarine
Up0%
GeneralLiability
Up1%
Umbrella/Excess
Up1%
CommercialAuto
Up1%
Workers’Compensation
Up0%
ProfessionalLiability
Up1%
D&OLiability
Up1%
EPLI
Up2%
Fiduciary
Up0%
Crime
Up0%
Surety
Up0%
© 2015 Insurance & Risk Management Knowledge Alliance
The National Alliance for Insurance Education & Research
December 2014
Market Barometer
(Released January 2015)
ByAccountSize
SmallAccounts Upto$25,000
MediumAccounts
$25,001–$250,000
LargeAccounts
$250,001–$1million
Up2%
JumboAccounts
Over$1million
Up0%
Up1%
Up0%
© 2015 Insurance & Risk Management Knowledge Alliance
The National Alliance for Insurance Education & Research
December 2014
Market Barometer
(Released January 2015)
ByIndustryClass
Manufacturing
Up0%
Contracting
Up1%
Service
Up1%
Habitational
Up0%
PublicEntity
Up0%
Transportation
Up1%
Energy
Up1%
For detailed rating analysis or market projections by industry class, coverage or account size, contact Vilma Scott at
[email protected].
AboutMarketScout
MarketScout, an insurance distribution and underwriting company headquartered in Dallas, compiles the Commercial and
PersonalLinesMarketBarometers.ThefirmownsandoperatestheMarketScoutExchangeatmarketscout.comaswellasover40
otheronlineandtraditionalunderwritinganddistributionvenues.MarketScoutfoundedtheEntrepreneurialInsuranceAlliance
(EIA) in 2009. In 2012, MarketScout founded the Council for Insuring Private Clients (CIPC). MarketScout has offices in Dallas,
California,Connecticut,Florida,Illinois,Indiana,Michigan,Nebraska,NewJersey,RhodeIsland,TexasandWashington,D.C. © 2015 Insurance & Risk Management Knowledge Alliance
The National Alliance for Insurance Education & Research