Commercial line premium rates remain patchy

The average long-term annual growth rate in commercial premiums is 5 per cent, according to stockbroker Merrill Lynch³ in its report on an Aon study of corporate expectations of the insurance market.

Merrill is forecasting a 6.4 per cent increase in commercial premiums for the June renewal period, but for growth rates to slow to 0 to 4.5 per cent next year. Within commercial, Merrill expects the rate changes to be patchy.

In the indemnity classes of Professional Indemnity and Directors & Officers, rates are hardening rapidly, but in commercial property they are expected to slow to growth of 2.7 per cent next year, it says.

These findings contradict insurer-based predictions in the JP Morgan/Deloitte 2009 General Insurance Industry Survey⁴, which forecasts an overall 4 per cent increase in commercial premiums.

JP Morgan/Deloitte sees premiums in workers’ compensation falling by 6 per cent in WA and 5 per cent in Tasmania, NT and ACT, but rising by 10 per cent in commercial motor and 6 per cent in Directors & Officers. The commercial market remains competitive.

Outlook brighter in personal

Premium growth rates in most personal lines areas are satisfactory and are projected to continue to lift in a steady fashion, according to Credit Suisse. 

JP Morgan predicts a 7 per cent lift in personal lines, including a 9 per cent rise in home and contents and 5 per cent growth in domestic motor.

1. Australian Property & Casualty Insurance – Credit Suisse – 23 April 2010.
2. Foreigners put heat on insurance – Australian Financial Review – 17 May 2010.
3. Australian commercial premium rate trends – Merrill Lynch – 4 May 2010.
4. 2009 General Insurance Industry Survey – JP Morgan/Deloitte – 21 January 2010

Source CGU Insight June 2010