Global commercial insurance prices increased 22% in the fourth quarter of 2020, according to the Global Insurance Market Index released by insurance broker Marsh.
The increase, the largest since the index was launched in 2012, follows average increases of 20 percent in the third quarter of 2020 and 19 percent in the second quarter.
Although the global index increased 22 percent, the index shows that price increases may be starting to plateau for some lines of insurance in certain geographies, said Marsh. For example, property insurance and directors and officers (D&O) insurance pricing in the U.S. showed signs of moderating increases.
All regions, except Latin America (9 percent in Q4 and Q3) and the Caribbean (Q4 2020: 9 percent; Q3 9 percent), reported double-digit price increases in composite insurance prices, led by the UK (Q4: 44 percent; Q3: 34 percent), Pacific (Q4: 35 percent; Q3: 33 percent), and the U.S. (Q4: 17 percent; Q3: 18 percent). Average composite prices in Continental Europe rose by 14 percent, down from 15 percent in Q3, while prices in Asia rose by 11 percent, compared to 12 percent in Q3.
The average global composite price increase in the fourth quarter was driven principally by property insurance rates at 20 percent (Q3: 21 percent) and financial and professional lines at 47 percent (Q3: 40 percent). Global casualty prices rose 7 percent in Q4 2020, compared with 6 percent in Q3.
D&O Pricing – U.S. and UK
In the U.S., financial and professional lines rates increased 28 percent in Q4, driven by D&O pricing, which also drove much of the 90 percent increase in financial and professional lines rates in the UK.
Pointing to some of the rates that are beginning to plateau, Marsh said that D&O for publicly traded companies in the U.S. increased 44 percent, which is lower than the 51 percent increase seen in the prior quarter (Q3 2020).
Marsh said that 95 percent of D&O clients in the U.S. experienced pricing increases in the fourth quarter and 15 percent saw reduced limits. “In the first half of 2021, it is expected that average pricing increases will continue to soften, barring unforeseen changes in conditions, although some challenging renewals will exist,” added Marsh.
In the UK, renewals for financial and professional clients continued to be extremely challenging, affirmed Marsh, with some D&O clients receiving triple-digit increases as capacity departed the primary and low excess markets. However, new insurers in the market in 2021 should bolster the mid-excess space and provide some relief, added the broker.
“Insurers [in the UK market] justified large D&O price increases and restricted coverage terms by citing a deterioration in claims, a COVID-impacted economy, insolvencies, wrongful trading, and a lag on claims post-government support,” continued the market index report.
Cyber pricing increased 17 percent in the U.S. during the fourth quarter, which was the largest increase since 2015, noted Marsh. The increase in ransomware attacks has seen average ransom payments top $1 million. – Insurers in many cases have scaled back to a maximum of $10 million in limits on any one risk, and narrowed coverage for ransomware-related losses. – All industries have been affected, particularly health care, manufacturing, education, and public entities.
In the UK, cyber rates increased 25 percent to 30 percent due to an increase in frequency and severity of claims, said Marsh, noting that capacity remained available, but carriers closely managed total capacity deployed on any given risk, while some cyber insurers introduced co-insurance/specific ransomware strategies.
Additional findings from the index report include:
- Composite pricing in the fourth quarter increased in all geographic regions for the ninth consecutive quarter.
- Public company D&O coverages continued to see large increases, especially in major markets such as the UK and Australia. Although D&O price increases may be moderating in other regions, prices are still up between 25 percent and 50 percent in many countries.
- U.S. property pricing increased for 13 consecutive quarters
- Seventy-five percent of renewing clients in the U.S. saw an increase in property prices, although the average Q4 rate rise of 19 percent was down from 24 percent in the previous quarter.
- Casualty pricing in the U.S. increased 9 percent in Q4, compared to 8 percent in Q3.
- Workers’ compensation pricing in the U.S. continued to decrease slightly, although some insurers are seeking higher rates at renewal because claim reserves are trending upward and there is a lack of interest income.
“The global insurance marketplace was very challenging in 2020, and we expect these conditions to persist through the first half of 2021,” commented Lucy Clarke, president, Marsh JLT Specialty and Marsh Global Placement.
“Although we are seeing signs that price increases are beginning to plateau in some lines, our clients continue to face tough trading conditions,” she added.
Global Insurance Market Index is a proprietary measure of global commercial insurance premium pricing changes at renewal, which represents the world’s major insurance markets and comprises nearly 90 percent of Marsh’s premium.
*This story ran previously in our sister publication Insurance Journal.