Global commercial insurance prices increased 13 percent in the fourth quarter of 2021, a decline from the 15 percent 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 percent 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 percent in the U.S. (up from 96 percent in Q3) and 92 percent in the UK (up from 73 percent in Q4).

Diving into the commercial insurance price trends, Marsh said increases across most regions moderated in the fourth quarter 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 percent (down from 27 percent in Q3); the U.S., which saw prices increase 14 percent (level from the previous quarter); and the Pacific region, where rates rose 13 percent (down from 17 percent in Q3). The rate increase in Asia was 4 percent (down from 6 percent in Q3), and 9 percent in Continental Europe (down from 10 percent).

The one exception to the moderating trend was Latin America and the Caribbean, where rates increased by 4 percent (up from 2 percent in the previous quarter).

Among the Marsh survey’s other findings were:

  • Global property insurance pricing was up 8 percent on average, down from a 9 percent increase in the third quarter of 2021, a 12 percent increase in Q2 and 15 percent in Q1.
  • U.S. property insurance pricing rose 7 percent, compared to 10 percent in the third quarter. U.S. property clients with poor risk quality, meaningful losses or significant exposure to secondary catastrophe perils—including wildfire, convective storm and pluvial flood—generally experienced above-average rate increases.
  • UK property insurance prices increased 10 percent in Q4, compared to 11 percent 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 percent in Q4, down from 12 percent 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 percent on average, down from 6 percent increases in each of the previous three quarters (Q1, Q2 and Q3).
  • U.S. casualty insurance pricing in the U.S. increased 4 percent, down from 7 percent in the third quarter. Excluding workers compensation, the increase was 7 percent.
  • UK casualty insurance pricing increased 4 percent, compared to a 7 percent increase in the prior quarter.
  • Continental Europe’s casualty insurance pricing increased 7 percent in Q4, up from 5 percent 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 percent, compared to 32 percent in the previous quarter.
  • U.S. FINPRO lines increased 34 percent in Q4, which was higher than the 27 percent rise in the third quarter. D&O insurance prices for publicly traded companies increased 6 percent, lower than the 10 percent 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 percent, a decline from the 54 percent rise seen in Q3. The rate of increase for D&O was 24 percent in the fourth quarter, compared to 61 percent in the third quarter, due primarily to increased capacity.
  • Continental Europe’s FINPRO lines increased 13 percent, down from 14 percent 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.”

Source: Marsh