Rates up 21% in UK and 8% in Europe with Covid-19 set to impact market for rest of 2020: Marsh

Average commercial insurance rates rose by an eye-watering 21% in the UK during the first quarter and were up 8% in continental Europe, according to Marsh’s latest index, which says Covid-19 will likely impact pricing for the remainder of this year. Many of the increases were driven by financial lines, particularly D&O, but property market rises are now significant and casualty is also on the rise. As previously reported by Commercial Risk Europe, Marsh’s Global Insurance Market Index found worldwide pricing was up 14% year on year in Q1. This is the largest increase since the index was launched in 2012 and comes despite “limited impact” of Covid-19 in the quarter. It is the tenth consecutive quarter of average price increases and the sixth in a row they were up across all regions. The figures show the hardening is accelerating, following increases of 11% and 8% in the preceding two quarters. Average global pricing for property risks increased 15% in Q1, and was up nearly 26% for financial and professional liability lines, and 5% in casualty. Price rises have been increasing in all three lines during the past year. Asia-Pacific saw the biggest overall rises in Q1 of 23%, followed by the UK on 21%, the US on 14% and continental Europe on 8%, with Asia and Latin America and the Caribbean up 6%. Commenting on the findings, Dean Klisura, president of global placement and advisory services at Marsh, said: “Pricing was trending higher in the first quarter, prior to any meaningful impact from losses associated with Covid-19. However, Covid-19 will likely have an impact on pricing for the balance of 2020.” Overall UK pricing increased for the tenth quarter in a row. Property pricing was up 10% and for the fifth consecutive quarter. Marsh said this was driven by a reduction in capacity as insurers look to reduce exposures on specific risks and across portfolios. Larger accounts generally experienced greater price increases than midsized clients, it added. UK casualty pricing was up 5% and has now increased for three consecutive quarters, following several years of single-digit decreases. General liability coverages generally showed the largest increases, typically in the upper-single-digit range, and there was little variance between large and midsize accounts, Marsh explained. But as in many other regions, financial and professional liability pricing, led by D&O, caused insureds most problems and was up 46% in the quarter. D&O pricing showed “significant” increases, with some large accounts experiencing hikes of 100%, said Marsh. Generally, midsize accounts saw smaller increases, but still faced prices up between 50% and 70%. Marsh said there has been a “significant” reduction in available UK D&O capacity since 2017. It witnessed a greater adoption of policy restrictions – such as insolvency, bribery and corruption exclusions – and more restricted discovery options across the market in the first quarter. Prices rise in continental Europe were also driven by property and financial and professional liability lines, according to Marsh. The cost of property cover was up 9% on average and for the sixth consecutive quarter. “Property pricing continued a steady rate of increase that started in early 2019, after a multi-year period of flat or declining pricing movement. Pricing for cat and non-cat risks increased in most countries, generally in the range of low single digits to 15%,” said Marsh. Continental European financial and professional liability insurance pricing increased 12% in the quarter, and double the figure at the end of last year. Marsh said most large countries reported high-single-digit to 20% increases for multiple financial and professional lines coverages. European casualty insurance pricing rose 4% in the quarter, with general liability driving the increase. The Pacific region saw the greatest overall price rises, with property up 23%, casualty 8%, and financial and professional lines 30%. Marsh said double-digit increases were reported for cat and non-cat property risks in both Australia and New Zealand, with rises exceeding 30% for many clients. It added that these increases were mainly driven by bushfires, severe hailstorm damage, and flooding in December and January. Financial and professional liability pricing has seen 11 straight quarters of double-digit increases. Marsh said conditions remained consistent with prior quarters. Side C-exposed listed companies experienced the largest increases, often in excess of 100%, it added. In the US, both property and financial lines recorded increases of more than 20% in Q1. Property rates were up 21%. This is the biggest since the index began in 2012. “Both catastrophe and non-cat property pricing showed similar increases. Deal structure parameters – limits, deductibles, etc – showed little change from the prior quarter,” said Marsh. Financial and professional liability insurance rates were up 23%, driven by D&O which saw increases of 44%. Marsh said 95% of D&O clients experienced an increase. It explained that pricing was affected by heightened litigation, with traditional securities lawsuits increasing in frequency and severity. Marsh said insurers continued to tighten terms and reduce capacity. Among public D&O clients, 37% increased retentions – the highest percentage in several years. The broker also noted that cyber insurance pricing rose 6%, the largest increase since 2016. Casualty pricing in the US increased 5% during the quarter. The excess liability market drove much of the overall casualty pricing movement, with average prices up 11%. But Marsh said many risks experienced significantly greater increases. The better news for buyers is workers compensation pricing decreased 1%. The average 6% rate rise in Asia was on the back of an 8% increase in property cover, the same for financial and professional lines, and a flat casualty market. Marsh said property pricing in Asia has steadily increased during the last five quarters, with Hong Kong and Singapore experiencing double-digit increases in both cat and non-cat exposures during Q1. Casualty pricing was generally flat following several years of moderate decreases, it explained. The 8% rise in financial and professional liability was the largest increase in several years and the fourth consecutive quarter of increases. Pricing increased in China, Hong Kong, India, Indonesia, Japan, Korea and Singapore for D&O, financial institutions and professional liability, explained Marsh. The overall 6% rise in Latin American insurance rates means the market has hardened for ten consecutive quarters. Property pricing in the region increased 9% in Q1, with casualty pricing up 2%. Financial and professional liability pricing rose 8% in the quarter.

Rates up 21% in UK and 8% in Europe with Covid-19 set to impact market for rest of 2020: Marsh

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