Premiums should remain stable, perhaps begin to soften, in 2016. However, there are certain pressures we must consider. First, AM Best has re-calibrated the equation they use to determine if an insurance carrier has secured enough reinsurance. Certain carriers may be forced to secure additional reinsurance in order to retain their positive AM Best rankings. The effected carriers will need to pass along that cost to the insured. Thankfully, reinsurance costs are at historical lows – so impacts could be minimal.
Secondly, we are in an election year. Whoever takes the White House, how will their policies effect the insurance markets?
Lastly, we have the stock market. The increasing volatility could signal the emergence of a bear market. Financial companies appear to be leading this charge downward – at least when this post was drafted. Should the market cool substantially, the insurance carriers could lose investment income… which could force them to increase our premiums to make up for that loss. However, given the underwriting profits the carriers have appreciated over the past few years and the competition for market-share that exists presently on the street, premiums would likely remain level (depending on how low a bear market takes us, of course). Additionally, expect M&A activity to continue on both the carrier and agency-sides.
In all, 2016 will likely be a changeable year – especially in the 2nd half. We will stay on top of the carrier financial reporting and will continue to monitor the street. As the new curves in the market present themselves, we will make sure that our insured clients are prepared. Onward! -Scott H. Sutter, President of SRT
