Too much capital is washing around the American market, dragging down prices and helping to heap further pressure on the industry.
According to The Council of Insurance Agents & Brokers’ (CIAB) second quarter Commercial P/C Market Index Survey, excess capacity chasing market share in the commercial property/casualty marketplace has resulted in another quarter of declining renewal pricing.
Brokers across the country reported that capacity was plentiful for all lines, with one broker describing capacity as “endless at this point” while another said, “appetite for premium is at a desperate level”.
On average, renewal rates dropped by about 6% in the second quarter, compared with a 5% decrease in the first quarter of 2010.
“It’s the same old story,” said CIAB president Ken Crerar. “Carriers continue to fight aggressively for new business as capacity flows into the market. It’s like someone forgot to turn off the spigot. No one seems to know when the reservoir will dry up, but in the meantime, it’s definitely a buyers’ market.”
Commercial renewal pricing for small, medium and large business accounts continued to decline in the second quarter, compared with the first quarter of the year. Large account rate declines were again slightly more than the other accounts, but pricing for all account sizes was soft, according to CIAB’s survey data.
All individual commercial lines included in the survey experienced rate decreases, compared with the previous quarter. There was no notable change in customer demand for insurance in the second quarter, the brokers said. Only 26% of those surveyed said demand was up – about the same response as in the first quarter.