Webcast: Global Insurance Markets and Risk Trends in 2018
The global commercial insurance marketplace is healthy, although there are some trouble spots for insurance buyers to watch, according to panelists on Marsh’s The New Reality of Risk® webcast.
In the fourth quarter of 2017, global composite insurance pricing increased slightly, according to the Marsh Global Insurance Market Index, driven in part by the impact of last year’s natural catastrophes on the property marketplace. This marked the first pricing increase in the index since 2013.
In markets that were affected by 2017’s losses, to varying degrees, we are seeing a push for pricing increases,” said Tom Davies, CEO of Bowring Marsh. “Regions that were largely unaffected by 2017 losses are seeing considerably less change, although the size of reductions has generally slowed or stopped.”
Globally, property pricing increased 3.2% in the fourth quarter, although renewal results varied widely and were often specific to an individual buyer’s risk. “Many insurers that were hit hard by last year’s catastrophes are looking to get rate uplifts, but that is proving difficult given the abundant capacity in the market, as shown by recent renewals,” said Duncan Ellis, Marsh’s US Property Practice Leader. For the remainder of 2018, “insured losses from Harvey, Irma, and Maria will likely deplete a sizeable amount of the industry’s capital and surplus. However, we anticipate this to be an earnings event only.”
In the fourth quarter of 2017, global casualty pricing fell, on average, by 1.5%. With the exception of a slight increase in the first quarter of 2017, pricing has consistently dropped each quarter for the last three years. Conditions varied by region, with pricing continuing to increase in Australia and Latin America and continuing to fall in the US, Continental Europe, and Asia. UK pricing increased for the first time since 2014.
The US workers’ compensation market remains aggressive, said Tony Tam, Marsh’s US Casualty Placement Leader, but UK employers liability insurers pushed for pricing increases of as much as 9% in the fourth quarter. Most buyers continue to see favorable renewal outcomes in general lability, but underwriting results for insurers continue to deteriorate. And auto liability remains a difficult line for insurers.
Global pricing for financial and professional lines increased by 0.1%, but fell in the US for the ninth consecutive quarter. In the US, D&O pricing reductions slowed, but strong competition has helped to stabilize the market.
Despite the favorable pricing, insurers are putting greater emphasis on policy wording in both the US and UK. “We’re seeing insurers restrict global terms and conditions that were previously readily available — for example, global tax true-up extensions and reverse DIC provisions,” said Ann Longmore, US Multinational Leader in Marsh’s Financial and Professional Practice.
Despite often favorable conditions in commercial markets, many companies continue to rely on captive insurers to manage risk. Although the number of captive entities fell in 2016 and 2017, the number of global captives has increased 30% over the last 10 years, with particularly strong growth coming from the Asia-Pacific region, said Ellen Charnley, President of Marsh Captive Solutions. And captives continue to underwrite critical risks, including property terrorism and cyber.