Nordic Insurance Market Commentary

The Nordic Insurance Market experienced moderate pricing increases across most industries and insurance lines in the quarter. Insurance market conditions have been challenging in the Nordics since the fourth quarter of 2019, a trend that accelerated in the first half of 2020 and continued across most lines in the first quarter of 2021.

Business candle stick graph chart of stock market investment trading. Financial chart with up trend line graph.

Prices Increase at More Moderate Rate in First Quarter

Global commercial insurance prices rose 18% in the first quarter of 2021, the fourteenth consecutive quarter of price increases, which is the longest stretch of increases since the inception of the Marsh Global Insurance Market Index in 2012. The first quarter increase was lower than the 22% seen in the fourth quarter of 2020.

Nordic countries — Denmark, Norway, Sweden, and Finland — generally experienced moderate pricing increases across most industries and insurance lines in the quarter. Insurance market conditions have been challenging in the Nordics since the fourth quarter of 2019, a trend that accelerated in the first half of 2020 and continued across most lines in the first quarter of 2021.

Increases globally moderated in the first quarter due to a generally slower rate of increase in property insurance and financial and professional lines. Cyber insurance pricing diverged from the trend, with prices generally increasing — notably by 50% in Asia, 35% in the US, and 29% in the UK — driven by the frequency and severity of losses.  

Financial and Professional Lines

Nordic countries continued to experience pricing increases in financial and professional lines, approaching the level of increases in the global market. Since 2018, pricing in financial and professional lines in the Nordics has generally increased to the levels experienced in Continental Europe.

The pricing increases are largely driven by claims and by uncertainty following the COVID-19 pandemic, which has led insurers generally to reduce their risk appetite, lower the limits offered, increase deductibles, and, in some cases, narrow the scope of insurance coverage. 

Also, the underwriting process has become more diligent, leading to a prolonged process in which quotes are provided close to the inception or deadline for a tender.

Cyber Insurance

Cyber insurance pricing generally increased in the first quarter in the Nordics, while insurers limited their appetite for these risks. 

In the Finnish market, for example, larger clients with complex risks typically experienced increases greater than 35% for cyber insurance, with pressure on the cyber excess layer pricing where premium increases reached sometimes 100%. Overall, in Finland there was less appetite on primary layers, which contributed to higher prices. 

This followed the global trend; however, premium increases in the Nordics may take on more prominence due to historically low cyber premiums. Few carriers provided primary quotes, and those that did, expected to see substantially higher deductibles and waiting periods. 

Ransomware continued to be a primary concern, with insurers typically restricting coverage and limiting their exposure to these claims. More than ever, insureds are expected to display a sound cybersecurity strategy in order to be considered insurable and to receive best available terms and conditions.

Casualty Insurance

The Nordic market for casualty insurance generally experienced pricing increases in the first quarter, particularly within complex risks and for excess capacity. In particular, clients with large US exposures experienced pricing increases and requests for more information and the inclusion of risk engineers in the risk management process. 

In the Swedish casualty market, for example, rate increases in the high-single to low-double digits were common on primary casualty layers, while the historically soft excess market experienced rate increases up to 10%. Insurers continued to apply, and in some cases broaden, exclusions related to COVID-19 to exclude not only claims related to COVID-19, but to any kind of virus or, in some cases, any communicable disease.

Overall, new exclusionary language is being introduced by insurers, for example for communicable disease and cyber, as well as changes to sums and sub limits, for example for auto excess, recall, and professional indemnity. There continues to be competition for attractive risks — specifically clients with no or minimal US exposure and with a satisfactory claims history. 

Generally, both premium levels and insuring conditions needed to be approved by insurers’ regional or global responsible level to a greater extent than previously, diminishing the authority of local underwriters.

Property Damage and Business Interruption

Some insurers continued to experience an increase in property claims reported by clients, including major losses. Underwriters have taken a cautious approach, and generally had a lower appetite for new risks. 

Reinsurers required more information on exposure and potential accumulation of risk from insurers than experienced previously, meaning that insurers required more risk information from clients. The renewal process should thus begin sooner rather than later.

Property insurance rates increased in the 5% to 15% range in the Nordics for clients with a satisfactory claims history. 

In Norway, for example, clients generally experienced premium increases in the 10% to 15% range for property damage and business interruption (PDBI) renewals. At the same time, there were decreases in capacity, especially for terrorism insurance, where some clients at renewal were offered half the capacity for the same premium. Local premiums in Norway also reflected reinsurance capacity and global premiums. 

For clients with a poor claims history the increases varied significantly based on such factors as the type of losses, exposure, and the level of loss prevention work being done. There was a clear shift in risk appetite for most insurers, where clients that previously were actively pursued were not receiving offers or, in some cases, not receiving a renewal offer from their current provider. 

The Nordic market continued to offer 100% capacity, however, the global markets reduced capacity, thus decreasing competition. Demand for risk information was high and, at the same time, local mandates were reduced. Combined with the availability of underwriting resources at several insurers, there were at times delays in the process, which could have particular implications for clients in sectors including waste, recycling, food and beverage, and energy.

COVID-19 continues to have an impact

COVID-19 continues to have a lasting effect on the Continental Europe and Nordic insurance markets. Marsh is having strong ongoing dialogues with insurers to amend the current communicable disease exclusions, introduced in early 2020 at the rise of the pandemic. Insurers introduced these exclusions to ensure they are not at risk for disease claims on the programs. We are continually observing that insurers enforce tougher and more rigid guidelines on pricing, because of the financial impact of COVID-19. 

Overall, COVID-19 has impacted the Nordic insurance market less than it has global markets as Nordic insurance companies generally are not as exposed to pandemic-related claims. The region continued to experience competition for attractive risks; however, insurance pricing increases continued for property, some casualty, and financial and professional lines. 

Prepare for continuing market challenges

Before the current period of market challenges, Nordic clients generally were able to secure lower premiums at renewal, depending on their unique circumstances. Now, insurance pricing globally is generally rising, although the pace of increases moderated in the first quarter. 

To prepare for market challenges during renewals, there are a number of steps to take, including:

1. Prepare and start early 

With increased management scrutiny, underwriters are becoming more selective and asking for significant, detailed information. It’s important to understand the key information that insurers will require, and to allow adequate time for negotiation. 

2. Understand your priorities

In a challenging market, it’s important to know your priorities. For example, which is more important to you: breadth of coverage, top limit of sum insured, minimising the level of self-insured retention (SIR), or the overall premium spend? Having a clear strategy in place before commencing negotiations with insurers will be helpful.

3. Respect long-term relationships, but challenge the status quo

A strong, long-term relationship with a lead insurer can help bring beneficial results at renewal. Still, it is important to understand the context of your renewal quote and whether it might be beneficial to seek alternative lead quotations. Try to build a relationship with at least one following market that could “step up” if there is an insurmountable issue with the incumbent lead.

4. Differentiate through risk management 

Share with underwriters the details of risk management policies and procedures you in have in place, with specific reference to how they mitigate exposures. Insurers now are particularly interested in how organisations plan to return safely to normal following COVID-19. 

We invite you to read the Global Insurance Market Index First Quarter 2021  for a global perspective.

If you would like more information about pricing or other risk and insurance issues in the Nordics, please reach out to your local Marsh representative.