Global commercial insurance prices rose 11% in the first quarter of 2022, the eighteenth consecutive quarter of price increases, which is the longest stretch of increases since the inception of the Marsh Global Insurance Market Index in 2012. However, it was the fifth consecutive quarter in which the pace of rate increases slowed.
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, but the market has started to show signs of stabilization of pricing, albeit remaining somewhat challenging in terms of capacity and terms.
Nordic countries continued to experience pricing increases in financial and professional lines, almost matching the level of increases seen 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.
Across all Nordic countries, premiums are generally stabilising with directors and officers (D&O) liability insurance rates increasing between 5% and 10% in the last two quarters. In some cases, insurers are renewing at a flat rate. Some insurers are increasing capacity, and insurers that withdrew from the market in 2020 are beginning to return with new quotes.
A key topic of interest within D&O insurance in the Nordics is environmental, social, and governance (ESG) considerations and commitments. Insurers are requesting more information about clients’ ESG approaches and strategies, with a particular focus on sustainability and carbon reduction goals. It is expected that insurers will demand even more ESG-related information in the future.
Pricing, terms, and capacity remain issues for commercial crime insurers. Insurers’ focus remains on impersonation/social engineering fraud, which is the source of the vast majority of claims.
Cyber insurance pricing has seen high increases across the Nordics, while at the same time insurers limited their appetite for these risks. This follows the pattern seen in the Continental Europe market where cyber insurance rates increased by 80% in the first quarter of 2022, driven by capacity reductions and ransomware claims.
High premium increases, strict and rigid terms, and limited insurer appetite have made placements increasingly difficult for clients. Carriers demand that certain critical security controls are in place before even considering whether to provide terms and conditions. Ransomware continues to be a primary concern as insurers typically restrict coverage and limit their exposure to these claims.
Overall, underwriters are gathering detailed levels of information before determining insurability. A strong trend is that companies are exploring captive solutions or incorporating their cyber risks in already existing captives.
More than ever, insureds are expected to display a sound cybersecurity strategy in order to be considered insurable and to receive the optimal terms and conditions.
The Nordic market for casualty insurance experienced pricing increases in the first quarter, particularly in complex risks and for excess capacity. Clients with large US exposures experienced pricing increases and requests from insurers to provide more details on their risk management strategy.
In the Swedish casualty market, rate increases of between 5% and 10% were common on primary casualty layers, while the historically soft excess market experienced rate increases up to 10% in the last two quarters. The same was seen in the Danish and Finnish markets and often includes a more careful and scrutinised capital deployment.
A key topic of interest in the Nordics is the US excess auto exposure, where insurers are demanding more detailed information on auto fleets, limits, and pricing. Many insurers are assessing their offered limits more carefully depending on the client’s exposure. Hence, higher limits may need to be purchased.
Overall, exclusionary language was still being presented by insurers for communicable diseases for those clients that have not had this added to their terms during previous renewals. Cyber exclusions were also reconsidered in terms of proper write-backs for certain relevant casualty risks. Insurers offered amendments to sums and sub-limits for example, for auto excess, product recall, and professional indemnity. There continued to be competition for attractive risks – specifically clients with no or minimal US exposure and with a satisfactory claims' history.
Some insurers have experienced an increase in property claims, including major losses. However, the Nordic market has generally seen lower pricing increases compared to the Continental Europe market, likely due to a lower level of reported property claims in the Nordics.
Rate increases moderated throughout all four countries in the first quarter. There was a larger risk appetite among insurers and an awareness that pricing needed to be competitive compared to the clients’ demands for coverage.
However, there were still higher requirements for qualified risk information and data on claims. Reinsurers required more information about exposure and potential accumulation of risk from insurers than was previously required, meaning that insurers also required more risk information from clients. In this regard, natural catastrophe (NatCat) risks were a key focus for insurers that, in addition to requested risk information, generally lowered their limits.
Across the Nordics, many insureds are concerned with underinsurance due to the pricing index for building materials and whether they are in line with market prices for building materials. Underinsurance clauses and thresholds are in place, but becoming increasingly difficult to negotiate.
Before the current period of market challenges, Nordic companies were generally able to secure lower premiums at renewal, depending on their unique circumstances. Now, insurance pricing globally is rising, although the pace of the increases has moderated for several quarters.
To prepare for challenges during renewals, there are several steps companies should take, including:
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 are likely to have a renewal quote ready approximately three months before renewal.
For renewals, companies should consider taking a portfolio approach, considering all lines of business and the total risk, including need-to-have versus nice-to-have clauses. An increasing number of companies are also considering their overall risk transfer strategy and which risks to transfer onto the balance sheet, or to potentially use captives, as each clause comes at a price.
In the current market, it is important to understand key priorities. For example, which is more important to a company – 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.
Insurers are requesting more specific ESG information than is usually found in an annual report, especially regarding in liability and property concerns. Many companies are in the early stages of ESG risk assessment, and might not be able to answer all related questions, but they need to demonstrate that they are considering the issues proactively and have a long-term strategy. The knowledge and details needed on ESG risks will only increase and ESG ratings for insurers will become more important.
Companies need to share with underwriters the details of risk management policies and procedures they have in place, with specific reference to how to 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 full Global Insurance Market Index First 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.
The recent invasion in Ukraine poses a number of consequences for organisations’ insurance programmes, employees, operations, and assets in Ukraine, as do the sanctions of the UN, US, EU, and UK aimed at Russia and Belarus. 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.
Your organisation’s insurance programmes should be carefully reviewed to assess how they are influenced by the conflict. There may be various limitations within your insurance policies, however, the most important ones include:
Across the Nordics, many insureds are concerned with underinsurance due the current inflation levels as well as the pricing index for building materials and whether they are in line with market prices for building materials. Underinsurance clauses and thresholds are in place, but becoming increasingly difficult to negotiate.