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Morgan Stanley Forecasts Slowdown In P&C Insurance Rates

Researchers at Morgan Stanley have projected a slowdown in property and casualty (P&C) insurance rates as lines begin to approach pricing adequacy.

Currently, overall rate increases continue to remain positive and above loss trend, as evidenced by improvement in Q1 commercial lines margins.

However, analysts at Morgan Stanley, one of the global leaders in executing transactions in cash equity and equity-related products for institutional clients, believes the evidence now points to an overall slowdown in the commercial pricing environment.

A news report by an online medium – Reinsurance News – indicates that the results of the latest IVANS Index reflected positive pricing year-over-year for all lines of business (except WC) for the month of May ’21, but a deceleration in most lines as compared to last month.

This is even as Willis Towers Watson’s Commercial Lines Insurance Pricing Survey (CLIPS) showed that pricing was up 8% YoY in Q1 2021, but down sequentially from 10% YoY in Q4 2020.

The CLIPS also reflected increases in most lines, with the exception of Workers’ Compensation, which still remains negative but continued to temper a bit.

Morgan Stanley recommended careful attention to P&C insurers’ commercial margins going forward, with the possibility of some elevated loss trends.

According to investment analysts, among the factors that could influence loss trends are inflation, re-opening of courts, impact of employment on Workers’ Compensation and normalized driving levels’ impacts on commercial auto books.

Morgan Stanley cautions: “With a lack of catalyst for any significant bottom-line expansion, we could see multiples stagnate or come down as some choose to take profits.”

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