American International Group said its U.S. commercial line rates are increasing at an accelerated pace. A number of other major insurers have been offering similar observations in this earnings season.
“In U.S. commercials lines, we are seeing a rate increase overall of 4.1 percent on renewed businesses, with rate increases led by over 8 percent in our property line. The trend is accelerating from prior periods,” AIG’s Chief Financial Officer David Herzog said during the earnings conference call on Friday, Nov. 4.
AIG’s Chartis CEO Peter Hancock added that in terms of pricing, “we are seeing hardening, both in property and casualty space.”
This is a trend that really started for Chartis as early as in the first quarter of this year, Chartis CEO Hancock said. “And it’s just been a progression of year-on-year rate increase since then. I think we are leading the industry by about a quarter, in terms of rate.”
On the casualty side, the workers’ comp rate year-on-year in the third quarter was up about 6.3 percent. This is a trend that was initiated earlier, as early as middle of last year, Hancock said. “So we feel good about the pricing trend on the U.S. side.”
Other officials at major insurers also commented in their earnings reports that their rates are firming. Chubb CEO John Finnegan said during the Oct. 20 earnings call that his company is “pleased with the continued firming in the market.” For the third quarter, Chubb’s renewal rates were up 4 percent on average in its standard commercial business.
“Overall, we see a firmer toning in the market which would suggest that we could see a further increase in the rates going forward,” Chubb CEO Finnegan said.
Paul Krump, president of Chubb Commercial & Specialty Insurance remarked during the conference call that “we were really excited about the acceleration that we’ve picked up in the last quarter.”
“When we talked to agents and brokers, they clearly see the need for a firming market environment. They’re well aware of the CAT activity, the low interest rate environment, seven years of soft market pricing and the ever-present loss trends that we put up with. So of course, that’s putting a lot of pressure on insurance rates.”