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Premium rates in commercial insurance are expected to turn in 2017 due to downward pressures on profitability, according to a joint report by J.P. Morgan and Taylor Fry.
According to the survey of underwriters, brokers, and reinsurers, an average +2% turn in commercial rates is expected in 2017, after a -1% weighted average reduction overall on an inflation adjusted basis in 2016.
The report noted that despite a marginal improvement in commercial insurance class, with the ratio dropping from 106% in 2015 to 101% in 2016 driven by significant improvements in fire and industrial special risk and reserve releases in public and products liability, combined ratios remain too high for the industry to not take action on pricing.
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Kevin Gomes, Taylor Fry principal and senior actuary, said insurers and brokers remain concerned with competition, rates, and capacity.
“Participants are expected to make cautious efforts to restore profitability,” he explained.
Siddharth Parameswaran, J.P. Morgan insurance analyst, was of the same opinion that underlying pressures on combined ratios in 2016 are leading to premium rate increases not only in commercial classes, but also domestic.
The report has predicted an average 4% premium increase in home and car insurance in 2017, up from 3% in 2016. This despite a marginal improvement in domestic insurance classes, down to 90% in 2016 from 91% in 2015, due to lower catastrophe costs.
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