Cyber coverage has been a rapidly growing business segment for P/C insurers for years. But much more capacity may have led to this: U.S. cyber liability renewal rates declined during the 2017 first quarter for the first time since 2014, according to the Marsh Q1 Global Insurance Market Index.

Cyber liability rates dipped 1.7 percent on average during the quarter, the first time there was an outright decrease since 2014. The cause, according to Marsh, relates to capacity in at least two different areas.

“Overall capacity is increasing as new markets enter and existing markets expand their capacity levels,” Marsh said in its report. “Second, many clients are now purchasing cyber insurance for the first time, and existing large clients [more than $1 billion in annual revenue] are [purchasing higher limits as they become more aware of the emerging risks.”

For that second point, Marsh points out that there has been a 15 percent increase in limit amounts since 2015.

The downward trend in cyber liability renewal rates has been ongoing. According to marsh, they peaked at a 20 percent increase in the 2015 second quarter, dipping to 18.7 percent and then 16.9 percent in the 2015 third and fourth quarters. From the 2016 first quarter through the fourth, renewal rates declined from 12 percent to 6.9 percent, 5.2 percent and then a 1. 4 percent increase, respectively.

Overall Rate Renewals Slowed Their Decreases

Results for cyber are part of Marsh’s broader examination of the overall insurance market, and Marsh found two trends here: the fifth consecutive quarter of moderating renewal rate decreases, and the 16th consecutive quarter where rates declined on average, “largely due to the continuing forces of a global market with significant capacity and a competitive underwriting environment.”

U.S. casualty renewal rates increased for the first time since Q3 2014.
Specifically, global insurance rate decreases were down 2.3 percent for Q1, versus the previous quarter’s 3.1 percent decrease. Moderation in decreases hit property, casualty, financial and professional lines, Marsh said, adding that this was also the third consecutive quarter where global casualty rate decreases moderated – down just 0.6 percent. The factor that helped this result: U.S. casualty renewal rates increased for the first time since Q3 2014, nudging up 0.4 percent.

Meanwhile, global property rates dove by 3.6 percent on average in Q1, versus a 4.2 percent drop in the 2016 fourth quarter. Marsh also noted that financial and professional lines dipped by 2.6 percent, compared to 3 percent in the quarter before.

Other results from the Marsh report:

  • Global commercial insurance prices that remain competitive steered the industry combined ration just above 100.
  • Surplus capacity is 20 percent higher than in 2012, which is when Marsh noted (according to A.M. Best data) that industry combined ratios last exceeded 100.

Source: Marsh

Topics USA Cyber