Brokers and insurers provide further evidence of market hardening

Numbers put forward by brokers and insurers provide further evidence that the insurance market is hardening. For some regions and risks the swings are acute, but overall the uptick appears gentle. Global average commercial insurance prices rose by 2% in Q4 2018, according to Marsh. This marks the fifth consecutive quarter of increases and the biggest rise since the broker started its Global Insurance Market Index in 2012. All regions reported pricing increases during the same quarter for the first time. Continental Europe and the UK both recorded rises of more than 1%. The global price rise in Q4 was driven largely by property and financial and professional lines. So will the cost of casualty cover fall again? The Pacific region saw the steepest price rises, with an average increase of 16%. Marsh said overall the insurance market remains “stable”, with prices fluctuating within a relatively narrow range across most risks and geographies. Dean Klisura, president of global placement and specialties at Marsh, said: “Although the last quarter of 2018 saw average prices increase in all regions, the increases were generally modest. While pricing for property and financial and professional lines has increased globally for five straight quarters, market capacity remains strong in most geographies.” The Marsh Global Insurance Market Index captures year-over-year pricing movement, measured quarterly. The average global price rise of 2% recorded in the last quarter of 2018 follows on from a 1.4% increase in Q3 and 1.2% in Q2. Global property pricing was up 3.6% in Q4, slightly above rises recorded in the previous three quarters. Financial and professional liability price increases continued to accelerate, up 4.7% on average. This follows a rise of 3.3% in the preceding two quarters. Average global casualty prices declined 1.1% in Q4, continuing a trend of year-over-year declines stretching back to 2013. Continental Europe saw the second highest rate increases of any region, up 1.5%. Latin America came next with 1.4%, followed by the UK on 1% and the US and Asia both on 0.4%. The Pacific saw big increases again. Average rate increases have been above 10% in the region for some time. Continental Europe saw average prices rise for the first time since 2013. Average property pricing was up 3.1%, firming on both cat and non-cat risks. Casualty pricing declined by 0.3% but some lines, such as motor, reported minor increases. Financial and professional coverage pricing increased 0.9%, the first quarterly increase in several years. The average 1% rise in the UK marks the fifth straight quarterly increase. Property pricing, however, fell by 1.1% and in line with the rest of 2018. Casualty was down 3.1%. But financial and professional liability pricing was up by 6.7%, primarily driven by D&O on US and Australian listed risks, said Marsh. In the US, pricing has been pretty stable for the past year, said Marsh. But property was up 3.8% in Q4 and has increased each month since October 2017. Marsh said that at 7%, large layered programmes with gross written premium greater than $1m led the pricing increases. US casualty pricing declined 2% and has now decreased in all but one quarter since 2014. Marsh’s findings echo the comments of insurance buyers and brokers CRE has spoken to, who said there are finally signs that the insurance market is hardening. In recent results presentations, insurers have also talked about price increases during the year and in the last quarter of 2018. Average overall rises of between 2% and 4% were put forward. Peter Zaffino, AIG’s CEO of general insurance, said his unit increased rate by an average 4% across its book of business in the fourth quarter of last year. In Europe and the UK, rates were up about 3% on average. This was led by motor business with increases in the upper-single digits and D&O that rose in mid-single digits, he said. Rates were also up 3% in Asia-Pacific, led by property and financial lines increases in the mid-single digits. US excess casualty saw double-digit rate increases and commercial property saw mid-single-digit increases, added Mr Zaffino. QBE said it pushed through average premium rate increases of 5% last year, after a 1.8% rise in 2017. Australian operations led the way with full-year rate increases of 7.3%, followed by Europe with increases of 4.4%. Rises in Europe were driven by financial lines, UK motor, international property, most marine classes and international casualty, said QBE. AXA XL said insurance rates were up an average 4% in 2018. Swiss Re Corporate Solutions reported a 3% rise during the year. Zurich said it pushed through rate increases of 2% last year across most regions. Chubb’s chairman and CEO Evan Greenberg said its premium growth during Q4 was driven by improved pricing in the US, London and other markets around the world. “Globally, this [Q4] was our best quarter of the year – and for some of our businesses the best in several years – in terms of the pace and broad-based nature of price change and improved underwriting conditions,” Mr Greenberg said. Laurent Rousseau, CEO of SCOR Global P&C who also oversees the reinsurer’s corporate insurance unit, said there were solid signs of hardening in 2018 and early 2019. But Mr Rousseau said it is still too early to describe this definitively as the end of the soft market. The forthcoming Japanese renewals on 1 April and US mid-year renewals of 1 July should provide a clearer picture, he explained. Ahead of the 1 April renewals, Willis Towers Watson (WTW) has forecast that catastrophe loss-affected property and casualty (P&C) rates will rise by at least 10% in Asia through 2019. Looking specifically at Asia’s P&C sector, WTW expects non-catastrophe premium rate movements of -5% to +5% and catastrophe-exposed loss-free rates to move from flat to +5%. It is large catastrophe-exposed loss-affected accounts that will likely see rate increases of 10% and higher, predicted the broker.

Brokers and insurers provide further evidence of market hardening

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