Premium renewal increases slowed across every major commercial line except workers' compensation in the third quarter, according to the latest Ivans Index. That adds to evidence that the US commercial market is softening.
Rates were still up year on year in commercial auto, BOP, general liability, commercial property and umbrella. But in each of those lines, the average renewal increase was smaller than in the second quarter, and in most cases, the increase shrank month by month through the quarter.
“Commercial renewal rate change eased across most lines this quarter as the market continues to soften,” said Michael Streit, president of Applied Carrier.
General liability had the sharpest slowdown. The average renewal rate increase fell to 4.12% in the third quarter from 5.44% in the second, dropping from 4.99% in July to 3.19% in September.
Umbrella still had the highest increases of any line, averaging 6.88%, down from 7.96%. Commercial property averaged 5.65%, down from 6.40%, and BOP averaged 5.61%, down from 6.16%.
Commercial auto renewal increases slowed to 3.63% from 4.93%, falling from 4.03% in July to 3.29% in September.
Workers’ compensation was the only line where rates were still falling, with renewals averaging a 1.17% decrease. That was a slightly smaller decrease than the 1.37% recorded in the second quarter.
The Ivans Index measures the year-on-year premium change for the same policy at renewal. It analyzes more than 120 million data transactions from more than 38,000 agencies and 600 insurers and MGAs.
The slowdown in general liability and commercial auto is notable, because both lines are still expected to lose money. The latest forecast from the Insurance Information Institute (Triple-I) and Milliman expects net combined ratios in both lines to stay above 100 this year, driven by persistent pressure from claims costs. Milliman said commercial auto quarterly loss ratios were showing early signs of improvement.
If renewal increases keep falling while loss costs keep rising, the industry risks repeating earlier cycles, in which liability pricing softened too soon and had to rise sharply again later.
For agents and brokers, the softer market gives more room to negotiate at renewal, especially on property and BOP accounts, where competition among carriers is increasing. Clients that have absorbed several years of increases may now see renewals close to flat, or even reductions, for well-managed risks.
Streit said agencies and brokers are trying to consolidate their business with preferred carrier partners. In a softening market, carriers compete harder for that business, and agencies with the most premium to place have the most leverage on pricing and commission.
Brokers should still be cautious with liability-heavy accounts. Slowing increases in general liability and commercial auto don’t mean the pressure on those lines has gone away, and carriers may tighten terms, limits or attachment points even as headline rates ease. Locking in multiyear terms or improving clients’ risk management records now could pay off if the cycle turns.
