Global commercial insurance pricing rose 6% in the third quarter of 2022, according to the Marsh Global Insurance Market Index. However, it was the seventh consecutive quarter in which the pace of rate increases slowed; increases peaked in the fourth quarter of 2020 at 22%.
Nordic countries — Denmark, Norway, Sweden, and Finland — generally experienced moderate pricing increases across most industries and insurance lines in the third quarter. Insurance market conditions have been challenging in the Nordics since the fourth quarter of 2019. As elsewhere, the market has started to show signs of pricing stabilisation; the cyber market remained challenging.
From 2019 to 2021, pricing for directors and officers liability (D&O) insurance in the Nordic market increased between 20% and 40%, on average, at each renewal. In 2022, pricing in the Nordic D&O market averaged between flat and 25% increases. Insurers overall reduced their D&O capacity and coverage.
Environmental, social, and governance (ESG) considerations and commitments remained a key concern. Insurers requested more information about clients’ ESG approach and strategy, with a focus on sustainability and carbon reduction goals.
An increase in the number of claims drove an increase in average crime insurance pricing from 2019 to 2021. The Nordic countries generally experienced a stabilising market, although some clients experienced increases ranging from 25% to 50%.
Insurers generally decreased limits and increased retentions, particularly for social engineering fraud. Insurers often required clients to place both their crime insurance and another financial and professional lines of insurance, such as D&O, with the same insurer.
Some of the Nordic countries are also seeing a continued limited appetite for commercial crime, principally on a primary level and generally the insurers can be restrictive to underwrite crime.
Cyber insurance pricing remained challenging. In the two major cyber insurance markets, the US and London, pricing increases up to 200% have been experienced in the past few years. Underwriters focused on organisation’s level of cybersecurity.
In the Nordics, cyber insurance pricing increases moderated in 2022, while at the same time insurers limited their appetite for these risks. This follows the pattern experienced in the Continental Europe market where cyber insurance rates increased by 53% in the third quarter of 2022, driven by capacity reductions and ransomware claims.
Across the Nordic markets, the cyber insurance market remained challenging, especially for clients with limited or no cybersecurity measures. Underwriters showed little flexibility, which has resulted in prolonged tendering and renewal processes. Ransomware attack concerns remain a focus for insurers, and we have seen sub-limits or no cover for ransom payments. Other insurer concerns centered on supply chain and systemic risk; however, few insurers have introduced limitations for such exposures.
Insurers also reviewed clients’ cybersecurity maturity, or perceived lack thereof. There was a significant probability of cyber insurance not being renewed, or not quoted, if insurers assessed that a given client lacked a sufficient level of cybersecurity.
The Nordic market for casualty insurance experienced pricing increases averaging between flat and 10% in the third quarter. Global composite pricing for casualty insurance rose by 4% in the quarter, a decline compared to the 6% increase in the second quarter.
Overall, the casualty market in the Nordics stabilised for primary or non-layered policies. Exceptions included clients with high US exposures, including substantial US excess auto exposure, for which insurers sought detailed information. Many insurers scrutinised limits depending on the client’s exposure.
Clients with large US exposures generally experienced pricing increases and requests from insurers to provide more details on their risk management strategy.
Global composite pricing for property insurance rose by 6% in the third quarter, compared to an increase of 6% in the prior quarter.
A similar moderating tendency for PDBI premium rates was experienced in the Nordic markets. At the same time, insurers remained disciplined with respect to capital deployment. The Nordics experienced pricing increases between 5% and 20%, on average.
Natural catastrophe (CAT) exposed risks in the Nordic markets were generally challenging, resulting in substantial pricing increases, though at a reduced level compared to prior quarters. Clients with large CAT exposures and/or negative loss records typically experienced the largest rate increases. Without qualified risk information, insurers generally offered decreased limits and/or increased pricing.
Inflation is, unsurprisingly, a hot topic in the Nordic insurance markets, with rising concerns of underinsurance due in large part to the pricing for building materials. Underinsurance clauses and thresholds are in place, but becoming increasingly difficult to negotiate.
As a result of rising inflation, insurers anticipate increased values at upcoming renewals. There have been many discussions about what would constitute a moderate percentage increase that would be acceptable to insurers. Most insurers avoid giving average percentages for global programmes. Policy limits, estimated maximum loss (EML) scenarios, and indemnity periods were also scrutinised. Limits of underinsurance and errors and omissions (E&O) are decreased or even removed if no increase in provided values is seen.
Ongoing insurance market challenges mean that insurance pricing in the Nordics and globally is generally rising, although the pace of the increases has moderated for several quarters.
Steps to prepare for renewal challenges include:
1. Prepare and start early
With increased management scrutiny, underwriters are becoming more selective and asking for more detailed information. It is important to understand the key information that insurers will require and to allow adequate time for negotiation. Companies should consider that insurers may well have a renewal quote ready approximately three months before renewal, though timing will vary.
2. Prepare your ESG strategy
Insurers continue to request more specific ESG information than is usually found in an annual report. Many companies are in the early stages of ESG risk assessment and might not be able to answer all related questions, but should demonstrate that they are considering these issues proactively and have a long-term strategy. The knowledge and details needed on ESG risks will only increase, and ESG ratings will have increasing focus from insurers and so it is important to understand and clearly articulate your current position and future strategy.
4. Differentiate through risk management
Companies need to share with underwriters the details of risk management policies and procedures they have in place, with specific reference to mitigating exposures.
5. Stay informed on the conflict in Ukraine
The conflict in Ukraine still gives rise to consequences for organisations’ insurance programmes, employees, operations, and assets in Ukraine, as do the sanctions from various countries and governmental bodies aimed at Russia and Belarus. Insurers are implementing various exclusions for related to Russia, Belarus, and Ukraine. It is Marsh's general recommendation that you should review your activities in Ukraine, Russia, and/or Belarus and seek legal assistance to assess the extent to which sanctions may affect your business.
We invite you to read the full Global Insurance Market Index Third Quarter 2022.
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.