Study Finds P&C Pricing Will Likely Gain Momentum

The current pricing structure in the insurance industry may exceed the market’s course correction of 6-7 years ago, but it will likely not reach the same status as hard markets in the 1970s, 1980s, and 2000s, according to property/casualty insurance research and advisory firm Assured Research. However, the company notes that an unexpected catastrophic loss may increase demand and restrict capital, leading to an alternative outcome.

“The conditions for sustained price increases are in place and anticipated losses from Hurricane Dorian will solidify that trend,” said Bill Wilt, President of Assured Research. “But absent an unexpected or unmodeled shock loss that simultaneously shrinks capital while increasing demand, we think this market will fall short of the industry’s historical ‘hard’ markets.”

As part of its research, the firm reviewed events that took place leading up to the three hard markets in recent property/casualty history, such as political and economic turmoil in the 1970s and its impact on insurers. In comparing past events with the present, Assured Research concludes that there are conditions for price firming in place, though the fact that most leading insurers are already beating their cost of capital will likely not lead to the same result.

As the year continues, the industry may gain more understanding of the market and its pricing structure. It appears that the market’s path is set, but any unforeseen severe events may impact its course.