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Global Insurance Market Index - 2020 Q2


Global Commercial Insurance Pricing Increased 19% in Second Quarter

Global commercial insurance pricing increased for the eleventh consecutive quarter in the second quarter of 2020, according to Marsh's quarterly Global Insurance Market Index, a proprietary measure of global commercial insurance premium pricing change at renewal, representing the world's major insurance markets and comprising nearly 90% of Marsh's premium. The increase, the largest since the index was launched in 2012, follows year-over-year average increases of 14% in the first quarter and 11% in the fourth quarter of 2019.

As with the first quarter, average price increases were driven principally by increases in property insurance rates and financial and professional lines.

  • Global property insurance was up 19% and global financial and professional lines were up 37%, while global casualty pricing was up 7% on average.
  • Composite pricing in the second quarter increased in all geographic regions for the seventh consecutive quarter. Asia increased 9% year-over-year, largely driven by increases in property (12%) and D&O (14%) coverages.
  • The US (18%), UK (31%), Continental Europe (15%), and Pacific (31%) regions all had double-digit pricing increases. Pricing increases in these regions were also largely driven by increases in property and directors and officers (D&O) coverages.
  • US 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 averaged over 100%. A similar situation exists in Australia, where a lack of competition has resulted in capacity shortage.

Key takeaways in Asia:

Property insurance pricing rose 12% in the quarter, the largest increase observed in several years and the fifth consecutive quarter of increase.

  • Property pricing increased to varying degrees in all territories across the region with the exception of China, which benefitted from abundant domestic capacity.
  • Large, complex, and multinational programs saw the greatest impact on pricing, deductibles, and limits.
  • CAT-exposed business in the region saw double-digit increases and a continued reliance on international markets for support.
  • Midsize and SME clients benefitted from strong demand in domestic markets.
  • Industry highlights:
    • Power: Despite mounting losses, Power industry still has good mid-tier capacity. The major international players are not just dominant, but they are also driving pricing more significantly upwards in general. Tighter wordings and coverage restrictions especially around event definition are also sharply in focus. In terms of coal or fossil fuel, the strain on capacity has yet to materially impact placements, although the security mix has certainly moved away from general leadership by a selected group of major carriers to a much broader spread of markets.
    • High-Tech: High-Tech industry has both risk exposures and natural catastrophe aggregates affecting pricing and capacity deployment. Concerns around supply chain(s) have been muted largely because limits in this respect are generally contained. Policy limits are still being placed in full, although the mix between domestic and international capacity often swings back towards domestic, largely influenced by softer local treaty conditions.
    • Large Commercial Real Estate: As real estate portfolios increase in size and complexity with a multinational aspect to them, the international insurers play a more integral role in capacity deployment. Cost containment strategies including deductible increases, and overall limit reductions have somewhat muted the true extent of the rating movement in this space. Clients risk transfer strategy will play a role in determining their renewal result.
    • Heavy Industrial Manufacturing: Challenged occupancy, as insurers focus efforts on reducing risk in their portfolio, and a real flight to risk quality is seen in this industry. Risk management has a significantly enhanced role with carriers. Poorly managed or under-invested accounts are attracting much greater scrutiny as insurers seek to deploy their capacity where risk management is fully engaged and risk can be better controlled. 

Financial and professional (FINPRO) liability pricing rose 14% in the quarter, the largest increase observed in several years and the fifth consecutive quarter of increase.

  • This 14% pricing increase does not tell the full story as many clients are either having to or electing for increased retentions in order to help keep premium increases to the 14% average. Hence the effective “like-for-like” increase would be greater.
  • A reduction in capacity, particularly from global insurers, driven by poor global underwriting results contributed to increase in pricing.
  • US-listed D&O was the most affected by pricing increases, some as high as 100%. Limited insurer appetite drove the market.
  • Financial institutions generally experienced rate increases across all coverage lines, as insurer appetite for these risks was also limited. For the larger financial institutions in Asia, there is also a big push by insurers to significantly increase retentions, which have historically been significantly lower than rest of the world.
  • Commercial crime is also seeing a withdrawal of capacity as concerns with social engineering and phishing triggered frauds rises.

Constant bar chart represents Global Insurance Composite Pricing Change.