Third Quarter Primary and Excess Liability Casualty Rates

Auto Liability

Median auto liability renewal rates remained flat throughout the first three quarters of 2011. As the chart shows, pricing for auto liability has remained relatively stable for the last seven quarters, ranging within plus or minus 5 percent. Preliminary data for the fourth quarter to date shows the trend continuing, with rates at or near flat at renewal.

Clients with heavy auto exposures and/or poor loss histories can expect to see rates renew at the high end of the range and/or possible changes to program structure. Increasingly, carriers are requiring insureds to provide more underwriting data than in the past; therefore, clients are encouraged to start the renewal process early in order to manage potential changes.

General Liability

General liability premium renewal rates decreased at a median rate of 1.8 percent in the third quarter (this represents a slightly larger rate decrease than the preliminary 1.4 percent drop reported in Marsh Insights: Benchmarking Trends Midyear Renewal Rates). Pricing for general liability programs remains consistent with modest decreases available for some insureds at renewal. As with auto liability and other product lines, the actual premium rate charged at renewal is based on a number of factors, including the company’s loss history and exposures, and may vary from the median and average rates shown in the chart.

Median rate decreases have moderated somewhat since the fourth quarter of 2010, the general liability insurance market remains flexible, and there remains a fair amount of competition among insurers for quality risks. Therefore, for the remainder of the year, insureds with favorable loss experience are likely to experience flat to modest decreases at renewal. Clients with difficult loss histories or complex exposures may see greater rate changes at renewal and/or potential changes in program structure.

Workers’ Compensation

Workers’ compensation rates decreased an average of 1.1 percent and a median of 1.5 percent at renewal during the third quarter. This represents a moderating of rate decreases, which averaged up to 3 percentage points higher in the first half of 2011. Overall, the workers’ compensation market remains stable for good quality risks. We will continue to monitor the marketplace very closely, as a number of issues—including deteriorating combined ratio trends, escalating medical costs, and legislative concerns—may accelerate a change in the market.  

Excess/Umbrella

In the third quarter (dominated by mostly July 1 renewals), umbrella/excess rates remained flat, with a median change of zero and an average rate increase of 0.7 percent. Median rates have remained flat dating back to the fourth quarter of 2010: Prior to this flattening of the market, moderate rate decreases were the norm. The data points to increasing pressures in the market. Some of the moderation of rates can be attributed to insurers seeking single digit rate increases, especially for certain tougher industry classes. Additionally, insureds’ exposures are increasing, in part due to rebounding economic conditions. Yet abundant capacity still exists, especially in the mid-excess layers, moderating any wholesale dramatic premium increase in excess liability programs.

Insureds should anticipate a transitioning market for the remainder of 2011, with continuing single digit rate increases offsetting robust competition in less hazardous leads and in the mid-excess layers. In terms of supply and demand, there exists significant supply to meet insureds’ needs. For a more comprehensive look at the excess casualty marketplace, please read The U.S. Excess Casualty Marketplace: Proceed with Caution from the summer edition of Marsh Insights: Casualty.

All primary rates—including general liability, auto liability, and workers’ compensation—encompass both loss sensitive and guaranteed cost programs: Neither primary nor excess/umbrella rates are adjusted to changes in total limits and/or attachment points.

This release includes revisions to the rates going back to January 2010. The revisions are a part of continuous data quality improvement initiatives by Marsh’s Casualty Practice and Global Benchmarking Services.

Publisher’s Note: Marsh Insights: Benchmarking Trends is a monthly newsletter covering purchasing behavior and pricing trends for four groups of coverages: property, casualty, financial and professional, and environmental. Each month we highlight a key trend or dynamic piece of data for a select coverage and analyze its potential effect on the insurance marketplace. The real-time data is sourced from Marsh’s Global Benchmarking Portal.

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