Rate increases in Europe outpace global average in Q4: Marsh

Europe’s commercial insurance rates recorded an average spike of 4% in Q4 2023, according to broker Marsh, outpacing the global average of 2%. But rates in the UK were flat during the last quarter, Marsh said on publishing its Global Insurance Market Index.

Rate rises in Europe have outpaced global prices increases for the past five quarters, according to the index, up 5% in the first two quarters of last year, followed by rises of 4% in Q3 and Q4. While global rates have recorded their 25th consecutive quarterly increase, Q4 2023’s rise of 2% is the lowest in the previous 17 quarters.

Pat Donnelly, president of Marsh specialty and global placement, said: “At a time of much global economic uncertainty, clients will welcome the increased stability in insurance rates – especially for property exposures – and increased competition from insurers for well-managed risks.”

Marsh said property rate increases continued to moderate for buyers in Q4 2023, but rates in Europe were still up 7%, and above the global average of 6%. European rates were largely influenced by catastrophe events in the region, including earthquakes in Turkey, flooding in Greece and Germany, and hailstorms in Italy, the broker said.

“Underwriting scrutiny continued regarding catastrophe aggregates and deductibles, limitations on cover for non-physical damage, cyber, terrorism, and strikes, riot, civil commotion (SRCC),” the broker added.

Europe’s casualty insurance rates rose 6% on average in Q4 2023, according to the index, again outpacing the global average of 3%. Capacity in Europe’s casualty markets drove competition in the mid-market space, Marsh said. But underwriters continued to scrutinise portfolios for potential exposure to polyfluoroalkyl substances (PFAs), as well as loss-impacted and heavily exposed risks.

In line with the global trend for lower rates in financial and professional lines, down 6% in Q4, Europe recorded a 7% pricing drop as capacity fuelled competition. This followed a fall of 4% in Q3. Marsh said about 10% of European buyers reinvested premiums savings to increase limits on financial and professional lines products.

Cyber insurance rates trended 5% lower for European buyers in the last quarter of 2023, while global pricing saw a 3% drop. Marsh said nearly 80% of buyers renewed their cyber insurance without any rate increase and with either stable or lower retentions as competition stepped up. The broker further noted that more stable rates led to clients buying higher limits, while insurers stripped out coverage restrictions as underlying risk quality improved.

Flat UK pricing in Q4 2023 continued to sit below the global average after a decrease of 1% in Q3 2023, an uptick of 1% in Q2 and rise of 3% in Q1. Average UK property insurance rates were up 1% in Q4, the index reveals, with larger clients recording rates at flat to up 5%, while mid-sized clients saw rate decreases of 5% to flat.

UK casualty insurance rates rose 2% in the last quarter, following an increase of 1% in Q32023, which Marsh said was driven by auto liability rates. Capacity contracted in the UK motor reinsurance market, where rate increases typically ranged from 7% to 20%, Marsh said.

UK financial and professional lines rates dropped 6% on average in Q4 2023, following a 9% drop in Q3. Directors and officers rates continued to fall, in the range of between 10% and 15%, but the pace of decreases began to slow, Marsh said.

Cyber insurance rates in the UK saw a 2% increase, bucking the trend for rate reductions globally and in Europe.