Global Insurance Prices Continue to Moderate in Q2 With Exception of Property: Marsh

Global commercial insurance pricing rose 3% in the second quarter of 2023, down from 4% in Q1, according to Marsh, which pointed to two notable trends during Q2: a moderation in cyber rates and continuing challenges in property insurance, which saw the largest increases of any major product line. This was the 23rd consecutive quarter in which composite pricing rose, continuing the longest run of increases since the inception of the index in 2012, commented the Marsh Global Insurance Market Index, noting that price hikes peaked at 22% in the fourth quarter of 2020.

Global average composite pricing was relatively consistent across regions — driven largely by rate decreases for financial and professional lines (down 8% in Q2 versus a 5% drop in Q1) and either decreases or moderating increases for cyber insurance, Marsh said.

Overall average pricing for financial and professional lines fell for the fourth consecutive quarter, driven by rate reductions and additional capacity — particularly in the UK where FinPro lines declined 6%, compared to a 4% decline in the first quarter. In addition, D&O pricing continued to decline in the UK, generally in the 10%-15% range.

Global cyber insurance pricing increases also moderated to 1%, compared to 11% in the prior quarter and 28% in Q4 2022. The drop in cyber premiums “was driven by significant moderation in the US, which saw average price decreases of 4%, compared to 11% increases in Q1 [2023],” the report continued.

Global property insurance, however, experienced the largest rate increases of any major product line, with average global prices increasing by 10% (level with Q1), Marsh said.

Breaking the composite pricing down by region, Marsh said, Q2 prices in the UK increased by 1% (down from a 3% increase in Q1 of 2023); in the Pacific they increased by 2% (down from 7% in Q1), and were flat in Asia (down from 1% increase in Q1).

The remaining regions recorded identical increases to the previous quarter: in Latin America and the Caribbean pricing increased by 8% (8% in Q1); in Continental Europe by 5% (5% in Q1); and in the US by 4% (4% in Q1).

Marsh noted that concerns about the impact of inflation on asset values and claims costs remained a key focus for insurers at renewal in most regions.

US Market Trends

Although Marsh goes on to take a deep dive into each of the global markets, Insurance Journal focuses here on U.S. pricing for property, casualty, financial and professional lines (FINPRO), and cyber.

Property. Property insurance pricing in the U.S. increased by 19%, compared to 17% in the first quarter, marking the 23rd consecutive quarter in which prices rose. Marsh said the main drivers of Q2 property price hikes in the U.S. are the cost of reinsurance and capital, strong capacity demand, limited new insurers, and ongoing losses. Best-in-class risks with limited natural catastrophe exposures and stable incumbent capacity typically experienced more favorable results compared to those affected by losses and/or had a geographic concentration of assets in natural zones, such as along the Gulf of Mexico, Atlantic coast, and California.

Casualty. Casualty insurance pricing increased 3%, compared to 2% in Q1. Excluding workers’ compensation, the increase was 5%. The workers’ compensation line helped keep average rate increases lower for auto and general liability in some cases where all lines were purchased with the same insurer. Many insurers applied exclusions involving per- and polyfluoroalkyl substances (PFAS) and biometric exposures.

Financial and Professional Lines. FINPRO pricing was down 10% in Q2, compared to a decline of 9% in Q1. Directors and officers (D&O) liability insurance pricing for publicly traded companies declined by 13%, the same as in the prior quarter.

Cyber. Cyber insurance pricing continued to moderate significantly, declining 4% in the second quarter, compared to an 11% increase in the prior quarter. Increased competition, improved cybersecurity controls, and a reduction in ransomware attacks in 2022 were key factors behind continued pricing improvement in cyber. However, there was an increase in the number of ransomware claims reported in the second quarter.

All references to pricing and pricing movements in this report are averages, unless otherwise noted. For ease of reporting, Marsh rounded all percentages regarding pricing movements to the nearest whole number.

Topics Property