Average Commercial Insurance Prices Rose 19% in Q2: Marsh Index

August 10, 2020

Global average commercial insurance prices increased 19% in the second quarter of 2020, the eleventh straight quarter they have risen.

Average price increases were driven principally by increases in property insurance rates and financial and professional lines — as was the situation with the first quarter, according to the Global Insurance Market Index released by global insurance broker Marsh.

Marsh said the increase was the largest since 2012 and follows increases of 14% in the first quarter and 11% in the fourth quarter of 2019.

Prices were up in all geographic regions. The U.S. (18%), UK (31%), Continental Europe (15%), and Pacific (31%) regions all had double-digit pricing increases, largely driven by increases in property and directors and officers (D&O) coverages.

Pricing for smaller organizations generally went up less than for midsize to large risks, according to Marsh.

“While capital remains adequate in most lines, insurers’ risk appetite is reduced as they are increasingly cautious in an uncertain environment.”

Global property insurance was up 19% and global financial and professional lines were up 37%, while global casualty pricing was up 7% on average.

Property pricing in the U.S. increased 22% in the quarter, with many accounts getting even bigger increases. U.S. casualty pricing was up 8% in the quarter. Workers’ compensation pricing fell 2%.

“Overall, underwriters continue to push for higher levels of pricing increases due to the combined effects of social inflation pressures, persistently low yields, and a number of large underwriting losses, including from COVID 19,” the report says. “While capital remains adequate in most lines, insurers’ risk appetite is reduced as they are increasingly cautious in an uncertain environment.”

Dean Klisura, president, Global Placement and Advisory at Marsh, said that while pricing movements in the quarter were affected by COVID-19, other large losses contributed to overall pricing pressures. He forecasts that this will continue. “As insurers continue to work through claims in property and directors and officers, and with the full cost of COVID-19 still developing, upward pressure on pricing is anticipated for the balance of 2020,” Klisura said.

Other findings from the Marsh survey:

  • Certain D&O markets saw large increases. For example, U.S. 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 average over 100%. A similar situation exists in Australia, where a lack of competition has resulted in capacity shortage.
  • Flow into both the London and Bermuda markets was noticeably higher than in prior quarters as clients sought more options.
  • Deal structure parameters — for example, limits and deductibles — showed little change from the prior quarter.
  • The excess liability market was up 21%, influenced by concerns of increasing claim severity.
  • Auto pricing increased 10%, with over 75% of clients experiencing an increase.

Source: Marsh Global Insurance Market Index

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