0% 2% 4% 6% 8%
+7%
+5%
+4%
+2%
+1%
0%
0%
0%
0%
-6% -8% -4% -2%
-6%
Figure 1: Commercial Lines rate changes, 2008-2017
Q1: 08 -6%
Q1: 09 0%
Q1: 10 0%
Q1: 11 0%
Q1: 12 +5%
Q1: 13 +7%
Q1: 14 +4%
Q1: 15 +2%
Q1: 16 +1%
Q1: 17 0%
Our projection is that rates in 2018 will on average be flat to down 5 percent. However, rate changes will vary by classification and by
est rate hikes, and other factors will likely further slow the economic engines in the coming years. Wise contractors are now getting margins, building their balance sheets, and conserving for a rainy day. Contractors should begin posi- tioning themselves for the impending shift ahead by retaining the best management team and labor talent; closely managing material, field, and overhead costs; and demanding acceptable margins to ensure long- term success. Health Insurance The Affordable Care Act (ACA) is still the law. A number of “repeal and replace” bills have failed to pass, so the law will continue to be enforced. We are still waiting on information about the Cadillac Tax and whether regulations will be implemented. For 2018, the number of age bands is likely to change. Currently, for small groups (two to 99 employees), most insurance carriers have one rate for children under 20 years old. In 2018, insurance carriers will di- vide the 0-20 age group into seven bands: 0-14, 15, 16, 17, 18, 19, and 20. As a result, premiums for age 20 and below could see significant increases of 20 percent to 50 percent. Rates for all “small” employers will be based on the employees’ and their dependents’ individual ages, plan design, and location of the com- pany. For example, a family of five will pay for each family member based on each individual’s age and the plan they select. Some younger employees or families with one child may realize lower premiums. All of the small group plans have changed to conform with the law and most have higher deductibles and copays; therefore, employees will have to pay more when they use the services. The actuaries at all the major insurance companies have determined
insurance company. Surety Bonding
In 2018, the Surety industry in the United States will continue to post further growth in overall premiums and below-average loss activity. The total direct written premium for the calendar year end for 2016 was up to $5.88 billion from the prior 2015 year of $5.62 billion (a 4.5 per- cent increase). Impressively, at the same time, the surety industry loss ratio fell in 2016 to 15.5 percent from 18.3 percent the previous year. This high watermark for surety industry volume continued to increase through the second quarter of 2017 to $3.13 billion in revenues, with a 13.6 percent loss ratio (compared with $2.98 billion in revenues with an 18.4 percent loss ratio at the second quarter of 2016.) Strong growth and profitability since 2005 have attracted an increased number of new sureties to the market, creating fierce competition for market share. During the last five years alone, startup front-line contract and/or commercial surety operations have included AmTrust, Axis, Ironshore, Freedom Specialty, Allied World, Berkshire Hathaway, QBE, Euler Hermes, Navigators, Crum & Forster, Patriot, Endurance, Everest, Sirius, Markel, andArgonaut. The number of reinsurance mar- kets have almost doubled since 2008. Although underwriting standards are relatively stable, overall supply has outpaced demand. This fresh credit capacity will likely cause increased pressure to further relax and soften terms and conditions (i.e., capacity, rate, indemnity) throughout the surety market. Slow and steady economic growth has extended the current building cycle to a sluggish pace. This has also lengthened the surety industry’s positive historical results. Continuing labor shortages, inflation, inter-
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csengineermag.com
january 2018
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