Hard, or Soft?

Just curious if anyone knows what is the P&C insurance market right now in U.S and Canada? Are we in a hard market, or soft market in general? Moderators, feel free to move this thread if it doesn’t belong here.

Call me a pessimist, but I have the feeling that another major recession is on the corner (maybe will start when the COVID spending stops) where things would get tough. Insurance might be a bit sheltered from recession, but it could still be negatively impacted.

This is a pretty broad question, i don’t have a sense but my gotos for insurance related general research are first AMBest, then insurance journal. sometimes ISO or other periodicals are good resources.

I’m also not sure it’s easy to generalize for the entire market. maybe. Certainly there will be correlation between external indices and the market, but i believe the different lines can each be at different stages of the market cycle. Though, personal vs commercial vs surplus may be a reasonable split, i don’t know.

Good luck pessimist!

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Thanks for the ideas! Instead of asking for a fish it’s great to just try to figure out how to fish.

I will try to look into AMBest for sure. I guess I’ve only read about it during exam 6, so it would be nice to actually “use” it and see what kind of information I can get out of it. Or maybe MSA since it’s more Canadian focused. I have no idea what insurance journal is and have no exposure to ISO except from exam 8, but I will dig into them a bit more as well.

I was thinking probably just using the combined gross/net written premium and LR over the years to see if there is any general trends.

You’ll get slightly different opinions on what conditions define hard vs modest rate increases, soft vs some price decreases… In my opinion hard market implies some significant level of rate increases, usually accompanied by some contraction in supply/availability.

If you work in this area, I’ll suggest you start reading 2 publicly available sources of P&C rate changes. The first is the CIAB P&C market survey. It gives some pretty detailed reporting by line of business, along with some nice historical rate index information. It doesn’t try to define hard vs soft market, but will give some good insights into what agents/brokers think the market is doing. Note that for some reason the 2Q21 report link isn’t working for me, but the prior reports are.

The second source is the MarketScout barometer. Similar to CIAB, it gives quarterly rate changes by LOB. They do attempt to define hard vs soft, with hard being 15% increases or more and soft being -10% or less. I think those definitions are their opinion rather than an industry type consensus. You have to give them your email address to see the full report. Unlike CIAB they don’t give you handy historical rate changes but you can piece them together from prior reports.

I’m no longer practicing in this area, but my anecdotal observation is that we are seeing some firming rates but I would not call this a hard market. YMMV.

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If we do hit a major recession, top line for P&C insurers may be heavily hit due to drops in inflation sensitive exposure bases (revenue, payroll,…). This isn’t necessarily always a bad thing in terms of loss ratios though.

Those are some cool sites, I have bookmarked them!

Dumb question again, what is the top line for P&C? Do you mean the lines that are most productive?

Top line means gross written premium

Thanks for the clarification.

Edit, so when I clicked on the link for the Q2 2021 P/C Market Report (I think the link is working now), the report is for Commercial Property only, do they have the other lines (e.g. personal property) but are only behind paywall?

(Plus… the last group of graphs kinda hurts my eye when I look at it…haha, but they kinda provide a good overview of market activities?)

No, something is wrong with the 2021 stuff I think. Look at 4Q2010 for a typical report.

For certain lines of business, the last two years or so have been a relatively hard market, following a prolonged soft market for several years. Specifically, commercial excess casualty and some management and professional liability lines. Rate changes have been very large and companies have been scaling limits back. That cycle is already starting to turn, with some new entrants to the market and rate changes coming back to more normal levels. There was some hardening of the market starting in 2019 that then got exacerbated by uncertainty around the pandemic, but those losses haven’t come to fruition, there are new insurers who have entered the market, and rates have reached pretty healthy levels.

Other lines of business, such as cyber and commercial auto, some people (particular policyholders) might call “hard,” but that’s related to very line of business specific issues and difficulty pricing those lines. I wouldn’t expect trends in those lines to change too soon because they haven’t reached reliable profitability yet despite rate increases.