How commercial premium renewal rates are trending in Canada

Canadian commercial line renewal rates increased at a slower pace across all major lines in Q1 2021 compared to one year ago, according to the latest commercial premium rate index from tech vendor Applied Systems.

Overall, the magnitude of rate increases is down across all lines relative to average premium renewals in the same quarter last year at 7.68% in Q1 2021, down from 9.02% in Q1 2020. Construction, however, saw a modest renewal rate increase of 8.76% in the first quarter of 2021 versus 8.48% last year.

Quarter over quarter, Q1 2021 results showed smaller increases on renewals across the most commonly placed commercial lines categories, including: Real estate property; business & professional services; construction, erection & installation services; hospitality services; and retail services. Applied said the categories refer directly to the General Insurance Statistical Agency categories under which all industry classifications are listed. The GISA list is used for Insurance Bureau of Canada Commercial Liability Statistical Plan reporting by insurers across Canada.

Average real estate property premium renewal rate change remained high in the most recent quarter relative to other industries, with a 10.26% rate increase, albeit down from 11.42% in Q4 2020. “Meanwhile, hospitality services continued its trend from 2020 of renewing at a lower rate relative to other industries, with 6.2% in Q1 2021, down from 9.02% in Q4 2020,” said the Applied Commercial Index, released Thursday. The index anonymizes and aggregates information from nearly 22,000 data transactions per quarter.

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The hospitality sector has been a challenge for insurers and MGAs since the pandemic began, with some clients seeing difficulties in finding affordable coverage for things like hotels and motels, event venues, and restaurants and bars. However, according to Applied’s report, the average premium renewal rate quarter-over-quarter was at its lowest point since Q1 2019, sitting at 5.44% in Q1 2021. That premium renewal rate change is down more than four-and-half points as compared to the same quarter last year (10.79%).

Construction, erection and installation services saw a modest renewal rate increase year over year. Quarter over quarter, the average renewal premium was 8.76% in the most recent quarter, down as compared to 9.11% in Q4 2020.

In the retail services sector, the average premium renewal rate decreased from 9.55% in Q4 2020 to 7.12% in Q1 2021. From the same quarter last year, the Q1 2021 average premium renewal rate is down more than a point-and-a-half (8.65%).

For business and professional services, the premium renewal rate averaged 6.59% in Q1 2021, down about a point from 7.60% in the last quarter of 2020.

“Our data indicates that while the magnitude of the premium increases [is] down across the most commonly placed classes of commercial lines business in Canada, compared to 2020, premium increases remain a reality for businesses today,” said Steve Whitelaw, vice president of industry & partner relations with Applied Systems. “The effects of the pandemic and the economic uncertainty continue to challenge small business, influencing renewal rates and risk advice, and we will continue to look to the index as a light post for how industry is responding to macroeconomic changes.”

Feature image by iStock.com/DNY59