Senior industry figures predict rate increases across many lines of commercial business in coming months
The soft commercial market is set to turn on the back of multi-billion losses from the recent flooding and the declining stock markets.
Senior insurance figures said rate increases were expected across many lines of commercial business in the coming months. Motor trade, commercial property, fleet and SME insurance are likely to see increases.
One top insurance executive said: “Flooding could be a catalyst for turning the market. 2008 will see commercial rates go up across the board. He added: “Commercial property, motor trade and business inter-ruption have been dispropor-tionately affected by the flooding. Rates will rise by 5%-6%.”
Andy Homer, chief executive of Towergate, said the company would be speaking to clients to inform them that rates would be increasing.
Homer said: “I don’t think these increases will be in one hit, but over the next 12 months. Better that
than a knee-jerk reaction of 20% in 18 months’ time.”
He added that the rate of increase would depend on the market’s reaction. Due to the competitive nature of the commercial property market, he said that rate increases would be less severe than in other lines of business.
Norwich Union, which this week announced that it would increase household rates by an average of 10%, confirmed it would begin implementing rate increases in sections of its commercial lines book from next month.
Jon Kitson, head of intermediary business at Norwich Union, confirmed that commercial rates would rise. He said: “Rates can no longer go backwards. We will be working with top brokers to see how we can achieve this.”
Allianz also indicated that commercial rates were set to rise. Paul Maidment, southern and London trading director at Allianz Commercial, said: “If the market needs a major incident to start focusing minds on pricing adequacy rather than exposures, this is as good as it will get.
“Insurers, brokers and the industry as a whole must work together to ensure that clients are aware that they should expect to see price increases sooner rather than later.”
Grant Ellis, chief executive of Broker Network, said: “The flooding was the straw that broke the camel’s back. Six months ago change in 2008 was barely an option, let alone changes in 2007.” He added: “We will probably end the year with commercial rates higher than they were at the start.”