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Wholesale and specialty flux to continue for 12 to 18 months

The state of flux within the US wholesale and specialty lines market is expected to continue for at least the next 12 to 18 months, attendees at the Wholesale & Specialty Insurance Association’s (WSIA) annual conference in San Diego believe.

“There are still some lines where more rate is needed,” said one senior excess and surplus (E&S) lines executive. “There have been reductions for almost 15 years, and so we are not close to getting where we really need to be.”

“We have had some movement on financial lines and property cat, but the casualty lines really need some more,” the E&S specialist added.

Many of those to whom The Insurance Insider spoke in San Diego believe prices will continue to rise for the bulk of business in the next 12 to 18 months. Catastrophe-exposed property business will continue to see rate rises, multiple sources noted, while other niche segments such as real estate are expected to now come into focus owing to that market’s poor performance.

Construction, commercial auto and general liability were most frequently cited as areas where further remediation work is required.

Of those three business lines, the commercial auto market continues to be the headline sector where further upwards pricing movement is needed, market protagonists said. A lack of skilled drivers and higher jury awards are just two of the issues cited by various market participants when asked what was driving the increased frequency and severity of claims.

Data published in August from the Council of Insurance Agents and Brokers (CIAB) showed that commercial insurance price growth slowed to 8.4 percent in the second quarter, from 8.8 percent in the first quarter, although the line achieved the second-fastest rate growth after commercial property, which rose 8.5 percent in the three months ended June.

CIAB data in August showed the average rate increase across all lines was 4.6 percent, up from 3.4 percent in the previous quarter.

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A veteran of the wholesale broking market at the WSIA conference told this publication that, when it comes to casualty, “more and more companies aren’t putting out the line sizes they used to”.

This is causing something of a capacity crunch. Brokers are having to work harder in order to complete placements, with pricing between the primary and excess layers becoming increasingly narrow.

Some larger programmes are finding it hard to be completed, with gaps appearing in towers where protection cannot be procured. This so-called “ventilation” is not prevalent, sources said, but has become an issue for some insureds unable to find capacity at certain points in their programme.

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