Market still hardening as property rate increases accelerate again: Marsh
D&O continues to soften
The global commercial insurance market is still hardening with average rates rising 4% in Q1, the same as the prior quarter, as the moderating trend runs out of steam, Marsh’s latest figures show.
The broker’s Global Insurance Market Index shows that average rate increases had fallen for nine consecutive quarters, from highs of 22% at the end of 2020 down to 4% in Q4 last year. While buyers hoped this trend would continue and tip the market into softening territory, the latest numbers suggest things may continue to harden for a bit yet.
Property pricing is a major factor in this outlook. Marsh McLennan president and CEO John Doyle explained during the broker’s first quarter results call that property insurance rate increases accelerated to 10% in Q1. This compares with a rise of 7% in Q4 2022 and 6% in Q3 last year.
Martin South, president and CEO of Marsh, said earlier this year that he thought rate acceleration in the property market would continue through the first quarter as catastrophe losses and higher reinsurance costs were absorbed. He was right and there could well be more to come as property reinsurance renewals remained tough at 1 April.
Doyle said that cyber insurance cost saw the biggest increase during the first quarter this year, although the pace of hardening continued to moderate.
He said casualty pricing was up in the low single-digit range in Q1. Casualty rates increases were at 3% in Q4 2022 and 4% in the preceding quarter, according to Marsh’s index.
Doyle said that rates for workers’ compensation were flat again in the first quarter of this year, with average financial and professional liability insurance rates down mid-single digits. Marsh previously reported that the D&O market “softened a little bit” in Q4 last year, with overall rates down 6% in that period.
Marsh McLennan’s Doyle said in this week’s result call that reinsurance market conditions remained “challenging” from 1 January through to 1 April renewals.
“Risk appetite for property catastrophe reinsurance remains constrained. Reinsurers continue to push for structural changes and tightened terms and conditions. Limited new capital has entered the market to support property catastrophe risks,” he said.
Doyle explained that US property cat reinsurance rates were up 40% to 60% on average for non-loss affected accounts, with higher increases for loss-affected business. US casualty reinsurance rate increases were more modest, he said.
Property cat rates were up 15% to 25% in Japan at the latest renewals, Doyle continued. “The impact of rate increases on ceded premiums was mitigated by higher retentions,” he said.
