Global insurance market hardening accelerated in Q4 with average rate increases of 11%: Marsh

Global P&C insurance market hardening accelerated in the last quarter of 2019 with average price increases of nearly 11%, compared to 8% in Q3, 6% in Q2 and 3% in Q1, according to Marsh that saw revenues increase 4% in 2019. Giving the latest top-level figures from Marsh’s quarterly Global Insurance Market Index during a results presentation, Marsh & McLennan’s Companies (MMC) president and CEO Dan Glaser said insurance “pricing is firming across a wide range of geographies and lines”, with the overall global P&C market “challenging”. According to results service Seeking Alpha, Mr Glaser revealed that financial and professional lines saw the biggest increases in Q4 with average rates up 18%, followed by property with an increase of 13%. Marsh’s Global Insurance Index finds that average casualty rates were up 3% in the fourth quarter, a touch higher than Q3. Mr Glaser added that rates continued to rise for commercial auto but were down for workers compensation. He also explained that Marsh’s index is skewed towards larger risks that are seeing higher premium increases than middle-market and small commercial buyers, although rates are up there too in certain geographies. According to Marsh, the middle market is seeing flat to low single-digit increase in many regions. President and CEO of Marsh, John Doyle, still doesn’t consider it to be an overall hard market but said it is “certainly becoming more challenging” for clients. During the results presentation, he said it is an earnings-driven market change and there continues to be a “very wide range” of market conditions around the world. He explained that UK wholesale business is seeing the largest increases, while overall rates are up about 10% in the US and average increases are in the high teens across Australia. Continental Europe, Asia, the Middle East, Latin America and the UK retail are seeing mid-single-digit average price increases, said Mr Doyle. Mr Glaser also revealed that Guy Carpenter’s Global Property Rate on Line Index rose by 5% at 1 January renewals. “Although renewal outcomes vary widely across individual programmes, capacity is tightened in some stress classes like commercial auto, D&O, medical professional and general liability,” he said. Meanwhile, the retrocessional market continued to see meaningful increases in rate at 1 January. Looking to the year ahead, Mr Glaser said reinsurance pricing pressure may build throughout 2020 and put pressure on primary carriers. The insurance market’s direction of travel will depend on loss activity, he continued. “Ultimately, it’s a matter of what the loss activity is, and the premium levels will over time reflect, you know, if it’s a benign environment or whether it's a harsh one,” he said. Marsh and its parent company both saw underlying revenue increase by 4% last year, but group operating income fell a touch to $2.68bn from $2.76bn the previous year. MMC saw revenues increase 11% to $16.7bn in 2019, or by 4% on an underlying basis, which is calculated as if the company and Jardine Lloyd Thompson (JLT) were a combined business in 2018. MMC completed its $5.6bn acquisition of JLT in April last year. Marsh delivered full-year revenue of $8bn, up 17% or 4% on an underlying basis. Underlying revenue was up by just 1% to $2.48bn in EMEA, up 7% in Asia-Pacific to $953m, and up 3% to $460m in Latin America. Total international revenue was up 3% on an underlying basis to $3.89bn. US and Canadian business saw underlying revenues increase by 5% to $4.12bn. MMC group operating income for risk and insurance services was $1.83bn in 2019 from $1.86bn a year earlier, with consulting delivering $1.21bn from $1.1bn in 2018. Guy Carpenter’s revenue increased by 15% in 2019 to $1.48bn, up by 5% on an underlying basis. Total consulting revenues stood at $7.14bn, up 5% or 3% on an underlying basis. MMC group revenue was $4.3bn in Q4, an increase of 15% compared with the same period in 2018, or 3% on an underlying basis. Operating income fell to $592m from $621m in the prior year period. Marsh's revenue in the fourth quarter of 2019 was $2.21bn, an increase of 23%, or 3% on an underlying basis. International operations produced underlying revenue growth of 1%, reflecting growth of 7% in Asia-Pacific and 2% in Latin America, partially offset by a decline of 1% in EMEA. In US and Canada, underlying revenue rose 4%. Risk and insurance services revenue was $2.39bn in the fourth quarter of 2019, an increase of 24%, or 3% on an underlying basis. Operating income was $365m, compared with $383m in the fourth quarter of 2018. Guy Carpenter’s fourth-quarter revenue was $152m, up 10% on an underlying basis. Consulting revenue was $1.88bn in the fourth quarter of 2019, an increase of 4%, or 2% on an underlying basis. Operating income of $336m rose 14%. Mr Glaser said 2019 was a “historic year” for MMC. "We closed the largest transaction in our company’s history, maintained our momentum through the integration and met our key milestones. We grew total revenue 11% and generated 4% underlying growth,” he said. Aon's revenue increased by $243m, or 2%, in 2019 to $11bn and net income jump to $1.53bn from $1.06bn, as “modestly positive” price increases helped boost fourth-quarter numbers.

Global insurance market hardening accelerated in Q4 with average rate increases of 11%: Marsh

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