Global Commercial Insurance Price Hikes Held Steady in Third Quarter

Global commercial insurance prices increased 3 percent during this year's third quarter, the same increase as in the prior quarter, according to the Marsh Global Insurance Market Index.

The third quarter marked the 24th consecutive quarter in which composite commercial insurance pricing increased, Marsh says, extending the longest run of increases since Marsh began the index in 2012. During that run of price hikes, increases peaked at 22 percent in the fourth quarter of 2022, Marsh says.

By region, third-quarter composite pricing ranged from a 1 percent decrease in the United Kingdom and in Canada to a 10 percent increase in the Latin America and Caribbean region. In the United States, commercial insurance prices rose by 4 percent on average during the third quarter, Marsh says, the same as during the previous 2 quarters.

Commercial insurance buyers in Europe saw prices increase 4 percent during the quarter, down from a 5 percent increase during the second quarter, while prices increased 1 percent in the Pacific region, down from a 2 percent increase a quarter earlier. Prices were flat in Asia as in the second quarter, the Marsh index found, and buyers in the Middle East and Africa saw a 3 percent increase.

Property insurance saw increases in every region during the quarter, Marsh says, while cyber and financial and professional lines pricing generally decreased or saw moderating increases.

Globally, property insurance prices increased 7 percent on average during the third quarter, down from a 10 percent increase during the second quarter, according to Marsh. Casualty insurance pricing increased 3 percent, the same as during the previous 3 quarters.

The third quarter was the fifth consecutive quarter in which overall pricing for financial and professional lines coverage fell, Marsh says. Average pricing decreased 6 percent during the quarter, compared to an 8 percent decrease in the second quarter. The third-quarter price decrease was driven by rate reductions and additional capacity, particularly in the United Kingdom, the November 1, 2023, report says.

In the cyber-insurance market, the third quarter was the first quarter to see an average price decrease since the second half of 2018, Marsh says, with global cyber-insurance pricing decreasing 2 percent, compared to a 1 percent increase a quarter earlier.

"After years of increases, even a modest reduction in cyber rates will be welcomed by clients and in large part is recognition of the hard work they have done to improve their cyber resilience," Pat Donnelly, president of Marsh Specialty and Global Placement, said in a statement. "However, the property market—and property catastrophe in particular—remains challenging and is an area of focus of our work with clients."

In the United States, property insurance prices increased 14 percent in the third quarter, down from a 19 percent increase in the second quarter of this year, Marsh says. It was the 24th consecutive quarter in which US property insurance prices increased.

US property insurance prices were driven by the costs of reinsurance and capital, strong demand, limited new capacity from insurers, and continued losses, the Marsh report says.

The quarter saw a continued bifurcation of renewal results among US property insurance buyers, with insureds with best-in-class risks, limited natural catastrophe exposures, and stable incumbent capacity typically experiencing better results, Marsh says. Risks considered by insurers to be of average to poor quality, loss-impacted, and/or with assets concentrated in catastrophe zones such as along the Gulf of Mexico, Atlantic Coast, or in California, generally experienced higher pricing.

US property underwriters continued to focus on inflation and insurance to value, the report says, while insurers generally maintained discipline around catastrophe deductibles and limitations of coverage for nonphysical damage, cyber, and communicable disease, the report says.

Marsh says that many of its US property insurance clients increased risk retentions during the quarter by way of increased deductibles or by turning to alternative risk transfer strategies such as captive insurance, parametric insurance, or structured solutions.

US casualty insurance prices increased 2 percent during the third quarter, down from a 3 percent increase the prior quarter, Marsh says. Excluding workers compensation, US casualty insurance prices increased 3 percent during the quarter.

The primary US casualty insurance market remained competitive during the third quarter, Marsh says, particularly for workers compensation. Insurers were willing to offer aggressive collateral terms and multiyear pricing commitments.

US auto liability pricing continued to increase during the third quarter, driven by loss frequency and severity, Marsh says. US excess liability prices increased 4 percent during the quarter, down from an 8 percent increase in the second quarter, as insurers continued to increase prices for large auto fleet exposures while general liability pricing varied depending on exposures, the report says.

"Sizable jury verdicts and awards continued to drive down capacity by layer and increase attachment requirements," the Marsh report says.

US buyers saw prices for financial and professional lines coverage decrease 6 percent in the third quarter, compared to a 10 percent decrease in the second quarter, according to Marsh. Prices for directors and officers (D&O) liability coverage for publicly traded companies decreased 8 percent in the third quarter.

Third-quarter fiduciary coverage pricing was generally flat in the US market, following a 5 percent increase in the second quarter, Marsh reported.

Cyber-insurance pricing continued to decrease in the United States during the third quarter, Marsh found, falling 6 percent in the quarter, compared to a 4 percent decrease in the second quarter. Excess layer pricing reductions continued to drive down total pricing for US cyber-insurance programs, Marsh says.

The Marsh report notes that new managing general agents positioned as InsurTechs continued to enter the US cyber-insurance market during the third quarter. "These entities are not insurers but are backed by capacity providers (insurers or reinsurers)," the Marsh report says.

Ransomware claims continued to increase in the United States during the third quarter, the Marsh report says. While improvements in cyber-security controls have led to a larger proportion of insureds not paying ransoms, those insured might still incur breach response expenses and business income losses covered under their cyber-insurance policies.

Increased insurer competition generally led to US cyber-insurance buyers being able to secure lower retentions without premium increases during the third quarter, the Marsh report says.