Global Commercial Insurance Prices Increased 3 Percent in Q2

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August 09, 2023 |

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Global commercial insurance prices increased 3 percent in this year's second quarter, compared to a 4 percent increase during the first quarter, according to the Marsh Global Insurance Market Index.

The second-quarter increase marked the 23rd consecutive quarter in which composite commercial insurance prices increased, the longest stretch of such increases since Marsh created the index in 2012. Those increases peaked at 22 percent in the fourth quarter of 2020, Marsh says.

According to the July 31, 2023, Marsh report, composite commercial insurance pricing was relatively consistent across regions, and was driven largely by rate increases for financial and professional lines along with either decreases or moderating increases for cyber insurance.

Composite commercial insurance prices increased 4 percent in the United States during the second quarter, 1 percent in the United Kingdom, 5 percent in Europe, 8 percent in Latin America and the Caribbean, and 2 percent in the Pacific region. Prices were flat in Asia during the second quarter, Marsh says.

Property insurance experienced the greatest second-quarter increase of any major coverage line at 10 percent, Marsh says. Meanwhile, cyber-insurance price increases moderated to 1 percent worldwide during the quarter, compared to an 11 percent increase in the first quarter and a 28 percent hike during the fourth quarter of 2022.

Casualty insurance saw a 3 percent increase during the second quarter while financial and professional lines insurance prices decreased 8 percent during the quarter, according to the Marsh index.

In the United States, the 4 percent composite price increase during the second quarter was the same as in the prior quarter, the Marsh report says.

US property insurance prices increased 19 percent in the second quarter, up from 17 percent in the first quarter, Marsh found. Total insured US property values grew 9 percent in the second quarter on average, with underwriters continuing to focus on inflation and insurance to value, according to Marsh.

US property insurance price increases during the quarter were driven primarily by the cost of reinsurance and capital, strong capacity demand, limited new insurers, and ongoing losses, Marsh says.

"Best-in-class risks with limited natural catastrophe (CAT) exposures and stable incumbent capacity typically experienced more favorable results compared to those impacted by losses and/or had a geographic concentration of assets in CAT zones, such as along the Gulf of Mexico, Atlantic coast, and California," the Marsh report says.

Marsh says insurers covering US property risks maintained scrutiny around catastrophe deductibles, coverage for nonphysical damage, cyber exposure, and communicable disease during the quarter. US property insurance buyers generally increased retentions and/or looked to alternative risk transfer methods such as captive insurance, parametric insurance, or structured solutions, according to Marsh.

US casualty insurance prices increased 3 percent in the second quarter compared to a 2 percent increase during the year's first quarter, the Marsh report says. Excluding workers compensation, the second-quarter price increase for US casualty coverage was 5 percent.

During the second quarter, insurers writing US casualty coverages were particularly focused on inflation, court systems reopening, an increase in the number of cars on the road post-pandemic, the property marketplace, and loss severity, Marsh says.

"Casualty continued to be driven by the workers compensation line, which helped keep average rate increases lower for auto and general liability in some cases where all lines were purchased with the same insurer," the Marsh report says.

Many US casualty insurers applied exclusions involving per- and polyfluoroalkyl substances (PFAS)—so-called forever chemicals—during the second quarter, Marsh says, as well as to biometric exposures.

Marsh says that US excess liability prices increased as insurers remained focused on loss trends driven by large companies with significant losses.

US financial and professional lines prices decreased 10 percent in the second quarter, Marsh says, compared to a 9 percent decrease in the first quarter. Directors and officers (D&O) liability insurance prices for publicly traded companies fell 13 percent in the second quarter, the same as during the first quarter. Pricing for post-transaction renewals led the decline in prices, according to Marsh, and when those are excluded the average price decreases were in the mid-single digits.

"Competition remained strong for primary and excess coverage from both new insurers and legacy markets," Marsh says. "Some insurers engaged on coverage lines that may be more difficult to place, such as property or fiduciary, to help win layers on the D&O program."

US fiduciary coverage pricing increased 5 percent in the second quarter compared to a 6 percent increase in the first quarter, the report says. Insurers continued to seek minimum retentions for larger plans of $5 million to $15 million, according to Marsh. "Some new entrants to the market quoted lower retentions; however, being new to the market they typically sought to be part of the D&O program in order to write fiduciary," Marsh says.

US cyber-insurance prices continued to moderate significantly during the second quarter, Marsh says, declining 4 percent compared to an 11 percent increase in the first quarter. Reductions in premiums for excess layers continued to drive down the prices for overall US cyber-insurance programs, Marsh found.

"Increased competition, improved cybersecurity controls, and a reduction in ransomware attacks in 2022 were key factors behind the continued pricing improvement," the Marsh report says. "However, there was an increase in the number of ransomware claims reported in the second quarter."

Cyber-insurance coverage generally continued to broaden in the United States in the second quarter, Marsh says, including some examples of the removal of coinsurance requirements and increased sublimited coverage enhancements. US insureds with improved cyber-security controls were generally able to negotiate lower cyber-insurance retentions, the report says.

“The Lloyd's of London war exclusion wording affected the marketplace and how programs are structured," the Marsh report says. "Certain insurers—predominately Lloyd's-based and European ones—will not accept a traditional war exclusion; as such, there is greater movement of insurers on larger cyber tower placements in order to maintain full follow-form coverage as it relates to war."

August 09, 2023