Q2 rates up 31% in UK and 15% in continental Europe, with upward pressure for 2020: Marsh

Average commercial insurance price increases of 31% in the UK and 15% in continental Europe during the second quarter contributed to a global increase of 19%, with property and financial and professional (finpro) lines leading the accelerating market hardening, according to the latest figures from marsh. The year-on-year increases were the biggest since the broker’s Global Insurance Market Index was launched in 2012. Marsh expects pressure from Covid-19 and other factors to cause further rate rises for the rest of this year. Dean Klisura, president of global placement and advisory at Marsh, said: “While pricing movements this quarter were impacted by losses related to Covid-19, other large losses contributed to overall pricing pressures. As insurers continue to work through claims in property and directors and officers (D&O) cover, and with the full cost of Covid-19 still developing, upward pressure on pricing is anticipated for the balance of 2020.” As reported last week by Commercial Risk Europe, the cost of commercial insurance is rising at an increasingly alarming rate for buyers, according to Marsh’s Q2 index. The average global price rise of 19% in Q2 follows a rise of 14% and 11% in the preceding two quarters, explained Marsh & McLennan’s president and CEO, Dan Glaser, during the firm’s second-quarter results call. Marsh’s full Global Insurance Market Index was published on Monday and shows that the cost of global property insurance was up 19% in Q2, while global finpro rose a whopping 37%. This compares to property price increases of 15% in the prior quarter and an increase of 26% for finpro cover. Casualty rates were up 7% in the second quarter. This follows an increase of 5% in Q1. Marsh’s index reveals that Q2 composite pricing increased in all regions for the seventh consecutive quarter. The UK (31%), continental Europe (15%), the US (18%) and Pacific (31%) all had double-digit pricing rises. They were largely driven by increases in property and D&O coverages. Certain D&O markets saw large increases. For example, US public company D&O prices were up 59% on average, with more than 90% of clients experiencing an increase. In the UK, D&O pricing increases averaged more than 100%. A similar situation exists in Australia, where a lack of competition has resulted in capacity shortage. D&O pricing increased more than 50% in France and 25% in Germany and Italy during Q2. Asia saw average overall price increases across all lines of business tracked in the index of 9%, and Latin America and the Caribbean 8%. The average 31% price increase in the UK follows a rise of 21% and 14% in the previous two quarters. It is the 11th consecutive quarter of rate rises. Property pricing was up 16%, with momentum increasing. Larger organisations generally experienced greater price increases than midsized firms. Marsh said capacity was a challenge, resulting in increased premiums, split placements and more restrictive terms. UK casualty pricing increased 5% in Q2 and has now risen for four consecutive quarters. Motor liability coverage showed the largest increases, typically in the upper single-digit range, with flat to minor pricing increases becoming the norm for general liability and excess liability. Marsh said there was little variation in pricing between large and midsize clients. It noted that casualty insurers are closely monitoring the potential impact of Covid-19, both in terms of reduced premium income due to a reduction in rateable exposure and eventual Covid-19 claims notifications. Average pricing for UK finpro risks was up 64%, driven largely by D&O. “D&O pricing showed significant increases, with several large organisations experiencing hikes above 100%. Generally, midsize clients saw less pronounced increases but still experienced material price changes… The lack of insurer appetite to compete for business has limited competition in the D&O space,” said Marsh. There were also large pricing increases in the 30% to 40% range for financial institutions and commercial crime coverages. Significant, but less pronounced, increases in the 10% to 15% range, were seen for cyber insurance, where capacity is less constrained than for other lines, Marsh explained. In continental Europe, average price rises of 15% in Q2 followed increases of 8% and 7% in the preceding two quarters. The cost of property insurance was up 20% in the region, driven by complex property placements and cat-exposed programmes. This marks the seventh consecutive quarterly increase. Most major countries – France, Germany, Italy and Spain – saw double-digit increases for cat and non-cat property risks. No continental European country in the index reported a decline in property pricing. “Pressure on rate, retentions and capacity drove an increase in the use of traditional wholesale markets in London and Zurich, as well as demand for alternative structures,” said Marsh. Continental European casualty insurance pricing increased 5% in the quarter – the fourth consecutive quarterly increase. Excess casualty drove the overall pricing increase, particularly for organisations with North American exposure. General liability pricing increases in France, Germany, Italy, and Spain tended to range between 5% and 15%. Auto pricing was generally stable. Workers’ compensation, where available, increased in the low single digits, according to Marsh. Average continental European finpro pricing rose 22% during the quarter. It generally increased in the 10%-20% range for most countries. Pricing increases accelerated, particularly for major D&O programmes in distressed sectors or with US exposure. Meanwhile, average pricing has now increased for 11 consecutive quarters in the US, after an 18% rise in Q2. The hardening is accelerating there too, after rises of 14% and 10% in Q1 2020 and Q4 2019. US property pricing increased 22% in the second quarter, with many accounts experiencing greater increases. Pricing for smaller organisations generally increased less than for midsize to large risks. “Flow into both the London and Bermuda markets was noticeably higher than in prior quarters, as clients sought more options,” explained Marsh. US casualty pricing increased 8% in the second quarter. The excess liability market was up 21%, influenced by concerns about increasing claim severity, said Marsh. Auto pricing increased 10%, with more than 75% of clients experiencing an increase. Workers’ compensation pricing decreased 2%. Finpro rates in the US increased 30%, driven by D&O where overall pricing rose despite the trend toward higher retentions and reduced limits. Employment practices liability pricing rose 8% in the US, with increases tied to Covid-19-related issues and many carriers pushing for higher retentions. Cyber insurance pricing rose 7%. Average price increases of 31% in the Pacific region were driven by a rise of 28% for property risks and 48% for finpro. Casualty pricing rose 9%. Property rates were up 12% in Asia year on year, and casualty rates were flat. Finpro pricing rose 14%, the largest increase observed in several years and the fifth consecutive quarter of increases. These numbers produced an average regional rate increase of 9%. Latin America and the Caribbean saw the smallest overall increases in Q2 of 8%, according to Marsh. Average property rates were up 14% and finpro 17%. Finally, in some good news for buyers, casualty rates in the region fell by 4% in the second quarter.

Q2 rates up 31% in UK and 15% in continental Europe, with upward pressure for 2020: Marsh

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