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Brokers may want to warn some of their clients to expect higher premiums in 2019 after new data pointed to select rate hardening across commercial lines.
The study from S&P Global Ratings suggested increases may be on the horizon for some SMEs – however, it also noted that competition in the market is likely to limit the extent of rate hardening.
Speaking to Insurance Business, S&P Global Ratings analyst Craig Bennett offered insight into where the rises are likely to occur – and why.
“We expect some further hardening in commercial property segments, as well as selective hardening in SME package products,” he said “We understand there has been a high level of focus on, and service provided to, the larger commercial clients and expect that to continue.”
However, while hardening is expected, Bennett said it was unclear how significant it would be.
“The extent of hardening is difficult to disaggregate given the range of insurance cover provided within the commercial classification, other than to reference our expectation that the appetite for property casualty insurers to maintain underperforming business is lessening,” he said. “Risk selection and measurement is a key focus for the larger P/C insurers.”
The S&P report also cast doubt over the profitability of small-to-midsized commercial lines for insurers, noting that some sub-segments do not appear to have sustainable returns.
“We expect the P/C insurers to continue to adjust their risk assessment as it relates to specific sub-segment risks as well as the associated premium required to cover those risks while producing an acceptable return,” said Bennett. “The focus on management and, where possible, mitigation of particular risks can affect the associated premium charged.”
