Rates rising in US but still falling in Europe and elsewhere: Marsh

The broker reported that outside of the US, rates typically fell between 1% and 3% and resulted in a decline in the Marsh Risk Management Global Insurance Index for the first time since its inception six quarters ago. The index represents a composite, or weighted, average of global rate change activity over the preceding four quarters. The US was the only region in the global index to show an increase of rates on renewal, with a rise viewed across all lines of business of 1.6%, reported Marsh.hideIt said that rate increases were most prevalent in professional liability and financial institution liability lines, which renewed on average flat to up 10% in the quarter. Marsh said that its clients that renewed their directors' and officers' liability (D&O) in the quarter typically saw flat to 8% increases in rate. Marsh reported that the most significant decrease in composite renewal rates-which underpin the global and regional indices-came in Latin America, at 3%. A decrease in the composite rate on renewal was also seen in Asia-Pacific (2.4%), the UK (1.7%) and continental Europe (1.3%). But the broker said that there are finally signs of change. A number of countries, including Germany, Italy and the Netherlands, reported a generally stable market compared to the first quarter. Others, such as Turkey and United Arab Emirates, reported rate increases. UK risk and insurance managers and brokers reported efforts by insurers to restrict coverage, limits and new wordings. Marsh reported that casualty insurance rates generally fell between 1% and 5% in the UK, Europe and Latin America, while increasing in the US. In financial and professional lines, renewals in the UK and continental Europe typically saw slight decreases, while renewals in the US were typically up between 2% and 3%. The broker said: "Asian markets continued to see an inflow of capital, and thus insurance capacity, which is driving competition to the benefit of insurance buyers there." Marsh reported that the effects of an increase in capacity from Asian and Middle Eastern insurers are being felt in other regions, particularly for property insurance. "The absence of major, insured catastrophe losses globally also contributed to property insurance rates generally falling or remaining flat across all regions," it added. "Newly available capacity from the Middle East, China, Japan and elsewhere in Asia has increased diversification and competition among property insurers," continued Marsh. The broker said that many organisations that are not considered to be exposed to catastrophes saw rates on average remain flat, while catastrophe-exposed organisations typically saw only 'moderate' increases. But the broker pointed out that it is early days in the Asian typhoon season and the north Atlantic hurricane season as the first major storm hit Taiwan and the east coast of China in early July. "Going forward, rates in areas typically impacted by typhoons (Japan, Taiwan, China, Hong Kong and the Philippines) and hurricanes (primarily US, Mexico and the Caribbean) may be affected by how the season plays out," stated Marsh. The broker added that in some major markets, notably Australia and Japan, rate movements for property catastrophe-exposed risks were broadly in line with those without such exposure. "Generally, rates in countries that have experienced major losses in recent years have stabilised or are declining, but remain higher than they were before those large losses," pointed out Marsh. The broker said that flooding remains the most problematic catastrophe peril for insureds and underwriters in many regions, as demonstrated by recent events in Germany and elsewhere along the banks of the Danube. Some high-profile tornado events in the first half of 2013 in the US put a spotlight on that risk for insureds but thankfully relatively low dollar losses limited the impact on the commercial insurance markets, added Marsh. In liability, Marsh said that financial institutions in parts of the eurozone saw liability rates increase during the second quarter of 2013. "Although rates for financial institutions either fell or remained stable in most major markets outside the eurozone, rates increased in Italy, Spain and France," it said. In most major markets, D&O liability insurance rates either remained stable or fell in the second quarter, stated the broker. "In the eurozone, insurance rates continued to decrease and some insurers enhanced their coverage offerings. In the US, although D&O premium increases persisted, they stabilised and began to lessen in the second quarter," it continued. Marsh said that merger objection claims and litigation in the US remained an 'issue' for D&O insurers, particularly for companies in the small to midsize market cap range, as nearly every M&A deal these days seems to trigger at least one lawsuit. The broker said that this trend has sparked higher premiums and prompted many D&O insurers to deploy separate M&A retentions, typically in the $1m to $2m range, to offset their average risk for these claims. The broker pointed out that other matters that continue to pressure D&O rates, despite abundant capacity, include escalating regulatory enforcement activities and shareholder concerns about board composition and executive pay. Marsh said that for errors and omissions (E&O) insurance, capacity remained 'generally abundant' across professional liability lines and believes that this is driving competition and generally keeping market conditions favourable for insureds. "Although the overall market was flat, conditions could vary significantly based on an individual organisation's industry and business specifics," added the broker. Marsh said that the demand for general liability insurance in Asia continues to grow. But 'significant' competition among local, regional and global insurers in the primary market means that insurance rates have fallen by up to 10%. "Due to the overall lack of litigation in the region, limits for third-party liability tend to be much lower than in Europe and the US. However, the potential remains high that demand for casualty insurance in Asia will continue to increase," postulated the broker. Marsh said that cyber risk and liability are a growing concern for businesses, consumers, insurers and governments worldwide. The broker said that underwriters are consequently scrutinising high-profile hacking incidents as losses continue to mount, most recently among credit card transaction processing firms.

Rates rising in US but still falling in Europe and elsewhere: Marsh

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