Global commercial insurance prices increased 13% in the fourth quarter of 2021, a decline from the 15% increases seen in both the second and third quarters, according to Marsh’s latest Global Insurance Market Index.
Marsh noted that this is the 17th consecutive quarter of increases, but rates began to moderate in Q1 2021. “Global pricing increases peaked in the fourth quarter of 2020 at 22%, and slowed or remained flat throughout 2021.”
The major exception to the trend of rate moderation was cyber, Marsh indicated. As a result of the ongoing increase in the frequency and severity of ransomware claims, cyber insurance rates continued to rise, and many insurers sought to tighten coverage terms and conditions. Prices increased 130% in the U.S. (up from 96% in Q3), and 92% in the UK (up from 73% in Q4).
Diving into the commercial insurance price trends, Marsh said increases across most regions moderated in Q4 due to a slower rate of increase in property insurance and directors and officers liability (D&O).
The report explained that much of the global composite rate moderation during Q4 was driven by the following regions: the UK, which saw a composite pricing increase of 22% (down from 27% in Q3); the U.S., which saw prices increase 14% (level from the previous quarter), and the Pacific region where rates rose 13% (down from 17% in Q3). The rate increase in Asia was 4% (down from 6% in Q3) and 9% in Continental Europe (down from 10%).
The one exception to the moderating trend was Latin America and the Caribbean where rates increased by 4% (up from 2% in the previous quarter).
Among the Marsh survey’s other findings were:
- Global property insurance pricing was up 8% on average, down from a 9% increase in the third quarter of 2021, a 12% increase in Q2 and 15% in Q1.
- U.S. property insurance pricing rose 7%, compared to 10% in the third quarter. U.S. property clients with poor risk quality, meaningful losses, or significant exposure to secondary catastrophe (CAT) perils — including wildfire, convective storm, and pluvial flood — generally experienced above average rate increases.
- UK property insurance prices increased 10% in Q4, compared to 11% in Q3. Loss activity through 2021, as well as rising reinsurance treaty costs, contributed to the price hikes.
- Continental Europe’s property insurance prices rose 10% in Q4, down from 12% in the third quarter. Catastrophe-exposed risks experienced the largest increases, at a slightly reduced level compared to prior quarters.
- Global casualty prices were up 5% on average, down from 6% increases in each of the previous three quarters (Q1, Q2 and Q3).
- U.S. casualty insurance pricing in the U.S. increased 4%, down from 7% in the third quarter. Excluding workers compensation the increase was 7%.
- UK casualty insurance pricing increased 4%, compared to a 7% increase in the prior quarter.
- Continental Europe’s casualty insurance pricing increased 7% in Q4, up from 5% in the prior quarter. Loss affected renewals were the most challenging, with insurers looking to restrict capacity.
- Pricing in global financial and professional lines (FINPRO), driven by cyber, had the highest rate of increase across the major insurance product categories, at 31%, compared to 32% in the previous quarter.
- U.S. FINPRO lines increased 34% in Q4, which was higher than the 27% rise in the third quarter. Directors and officers (D&O) liability insurance prices for publicly traded companies increased 6%, lower than the 10% increase observed in Q3. New capacity increased competition in the mid-to-high excess layers, and many clients increased their D&O limits.
- UK FINPRO lines increased 43%, a decline from the 54% rise seen in Q3. The rate of increase for D&O was 24% in the fourth quarter, compared to 61% in the third quarter, due primarily to increased capacity.
- Continental Europe’s FINPRO lines increased 13%, down from 14% in the third quarter. The D&O market continued to be stable, due to increases in insurer competition, appetite, and capacity. Despite outliers with U.S. exposures, certain industry sectors, such as life sciences and technology, experienced rate reductions on select programs.
“We are operating in a challenging risk and insurance market and will continue to focus on developing solutions in classes such as cyber, which will continue to be difficult for both clients and insurers,” said Lucy Clarke, president, Marsh Specialty and Marsh Global Placement. “More broadly, however, we expect continued moderation in rate increases through 2022, a trend which will be welcomed by our clients.”
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