Insurers Look to Cyber, M&A Coverage as Prices Decline for 9th Quarter: Marsh

August 14, 2015

Commercial insurance rates continued their global decline in the 2015 second quarter, a trend driven by a continued abundance of global capacity and a lack of large insured loss activity, Marsh said in its latest Global Insurance Market Quarterly Briefing.

At the same time, property/casualty insurers are increasingly looking to specialty coverages including cyber and transactional risk insurance for mergers and acquisitions (M&A) as a way to grow, the report says.

As of Q2, there have been nine consecutive quarters of overall rate declines, Marsh said.

Globally, natural catastrophe losses are at historic lows, which is helping profitability but also reducing the drive for rate increases, according to Marsh.

Pricing

Marsh said that the Asia-Pacific region saw the largest overall rate decreases, followed by the U.K., Continental Europe, Latin America and then the U.S.

Broken down: commercial casualty rates dipped at a more moderate rate than property, ranging from flat to a 5 percent decline dependent on the market. Property insurance dipped more than 5 percent on average, Marsh said.

Marsh’s reported noted that the Asia-Pacific region saw renewal rate declines greater than 7.5 percent on average. In Continental Europe, the average declines ranged from 5 percent to 7.5 percent, with the U.K. coming in at slightly worse averages. In Latin America and the Caribbean produced rate declines that varied on average from 2.5 percent to 5 percent.

The U.S. saw the least declines, with renewal rates staying flat or dipping to 2.5 percent on average.

Specialized Coverages

One exception to the price declines – specialized coverages – is led by a cyber insurance market that continues to firm up, Marsh reports.

Another bright spot: transactional risk insurance, particularly for M&A deals. Marsh said that demand for the specialty coverage continued to grow through the first six months of 205, jumping by 15 percent overall compared to the same period last year in terms of limits placed by Marsh.

“The demand for transactional risk insurance on M&A transactions continues to grow rapidly, as competition among acquirers continues to remain intense,” Karen Beldy Torborg, global practice leader for Marsh’s private equity and M&A sales practice, said in the report.

She said that dealmakers in the private equity and corporate space are “increasingly using insurance capital to get deals over the line, and we don’t see this trend subsiding anytime soon.”

According to the report, in Europe, real estate deals are driving the demand for transactional insurance and corporations U.S. and Asia-Pacific involved in buying and selling companies are buying it.
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