Global insurance pricing continued to rise, although at a slower pace, during the third quarter, which saw commercial insurance premiums increase an average of 6%, down from 9% in Q2, according to Marsh’s Global Insurance Market Index. The biggest increases were seen in cyber insurance, but pricing also followed the moderation theme.
Marsh said the moderation in composite pricing in most regions was driven by the first decrease in financial and professional (FINPRO) lines since the third quarter of 2017, which the index attributed to declines in directors and officers insurance.
Q3 marked the 20th consecutive quarter when composite prices rose and the seventh consecutive quarter when the pace of increases slowed, said Marsh, noting that global composite increases peaked at 22% in Q4 2020.
The U.S., with a composite pricing increase of 5% (down from 10% in Q2 of 2022), experienced the largest moderation in average price increases. Rates increased in the UK by 7% (down from 11% in Q2), in Pacific by 5% (down from 7%), and in Asia by 2% (down from 3%). In Latin America and the Caribbean prices increased by 5% (the same as Q2) and by 6% in Continental Europe (the same as the previous two quarters).
Breaking down the composite picture by coverage line, Marsh said property insurance rose 6% on average (level with the previous quarter), while casualty pricing was up 4% on average, compared to 6% in Q2.
The outliers were FINPRO lines, which dropped by 1%, and cyber insurance, which rose by 53% on average, outpacing other products. This is the first edition of its quarterly index that separates cyber data from global FINPRO data, said Marsh, explaining that the exclusion of cyber means that, for the first time since 2017, overall pricing in FINPRO lines fell by 1%, compared to a 16% increase in Q2 – a figure that included cyber.
In the largest cyber insurance markets, the rate of increase continued to moderate with prices rising by 48% in the U.S., while UK cyber rates rose by 66% on average, compared to 79% and 68%, respectively, in the prior quarter, said Marsh in the report, which is titled “Global insurance markets Q3 2022: Financial and professional lines pricing declines.”
In its analysis of U.S. pricing trends, Marsh said Q3 property insurance pricing increased 8% in the third quarter, up from 6% in the second, which marked the 12th consecutive quarter in which pricing rose.
Q3 casualty insurance pricing in the U.S. increased 3% compared to a rise of 6% in the prior quarter; excluding workers’ compensation, the increase was 5%. Excess liability rates increased 7%, compared to 16% in the second quarter as the market continued to benefit from new entrants and increased competition.
U.S. FINPRO lines saw prices decrease by 6% in Q3, a decline from the second quarter increase of 21%. Pricing dropped by 9% for directors and officers (D&O) liability coverage for publicly traded companies, driven by new capacity and competition and following a 6% decline in the second quarter.
In the UK, composite insurance prices increased 7%, compared to 11% in the second quarter. Property insurance pricing increased 6% year-over-year, the same level as Q2, while casualty insurance pricing increased 4%, also the same as Q2.
FINPRO pricing in UK was flat in the third quarter compared to average increases of 19% in the second quarter, while some products experienced rate declines. D&O pricing typically declined in the 5% to 10% range, with substantial rate decreases for large, multinational clients. Cyber insurance pricing increased 66% in the third quarter, continuing the moderation trend of the past several months, as losses continued to improve.
Composite insurance pricing in the third quarter of 2022 in Continental Europe (CE) increased 6% on average, the same rate of increase as the prior two quarters.
Property insurance pricing in CE rose 5% in Q3, compared to 6% in the second quarter. Casualty insurance pricing increased 7%, the same as in the prior quarter and the thirteenth consecutive quarter of increases.
FINPRO lines pricing rose 6% in the third quarter in CE. Stability continued for D&O liability pricing due to increased capacity and competition from insurers; pricing remained generally flat to low-single digit increases. Cyber insurance pricing increased 40%, compared to 50% in the second quarter, as new capacity entered the market.
Latin America and Caribbean
Composite insurance pricing in the third quarter in the Latin America and Caribbean (LAC) region increased 5%, the same as in the prior quarter. Property insurance pricing increased 5%, the same as in the previous quarter and the 16th consecutive quarter of increase, while casualty insurance pricing increased 6% in the third quarter, compared to 4% in the prior quarter.
FINPRO lines pricing rose 6%, the same as in the prior quarter.
Insurance pricing in the Pacific region increased 5% in Q3, down from 7% in the prior quarter and the seventh consecutive quarterly reduction in rate increases. Property insurance pricing increased 4%, down from 5% in the prior quarter, while casualty insurance pricing rose 10%, down from 11% in the prior quarter.
FINPRO lines pricing rose 4%, a decrease from 6% in the prior quarter.
Composite insurance pricing in the third quarter of 2022 in Asia increased 2%, down from 3% in the prior two quarters. Property insurance pricing rose 2%, the 16th consecutive quarter of increases, which peaked at 18% in the third quarter of 2020, while casualty insurance pricing was flat for the second consecutive quarter.
FINPRO lines pricing in Asia increased 5%,down from 13% in the prior quarter. The pace of rate increases for D&O continued to
moderate, with pricing in the range of 5% to 10% across Asia.
Cyber insurance remained challenging in Asia, with average rate increases of 25% or more experienced by some clients.
“The global business environment remains tough for clients. Ongoing inflation and geopolitical instability are affecting all sectors and we expect even more challenging conditions in the already strained property catastrophe market following Hurricane Ian,” commented Lucy Clarke, president, Marsh Specialty and Global Placement, Marsh, in a statement.
Marsh noted that reported changes are averages and the data used to estimate them cover a wide range of clients in terms of size, industry, location, claims history, and other parameters. Many clients experienced pricing changes that deviated from the average, Marsh said.