insights august 2019 global insurance prices continue to rise · global commercial insurance prices...

INSIGHTS AUGUST 2019

FIGURE

1Global Insurance Composite Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

Global Insurance Prices Continue to Rise Global commercial insurance prices rose by 6%, in the second quarter of 2019 (see Figure 1), nearly double the increase observed in the first quarter. The increase in the second quarter represents the largest increase in the Marsh Global Insurance Market Index since its inception in 2012.*

Overall, the insurance market demonstrated increased pricing in all major geographic regions and across multiple products. Globally in the second quarter:

• Pricing increased in all three major product lines — property, casualty, and financial and professional liability

(see Figure 2).

• Property and financial and professional liability pricing increased for the seventh consecutive quarter.

• Property insurance pricing increased by 8%.

• Casualty pricing increased by 1%.

• Financial and professional liability rose by nearly 10%.

For the third consecutive quarter, all regions reported composite pricing increases (see Figure 3). Regionally, composite pricing in the second quarter increased as follows:

• US 5%.

• UK 6%.

• Continental Europe 2%.

• Latin America and the Caribbean 1%.

• Asia 4%.

• Pacific 18%.

*Note: All references to pricing and pricing movements in this report should be considered averages, unless otherwise noted.

Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

-4.4%-4.8% -5.0%

-3.8% -3.6%-3.2% -3.1%

-2.3% -2.2%-1.9%

0.8% 0.9%1.2% 1.4%

2.1%3.0%

5.8%

Q2 19

2 • Global Insurance Market Index 2019 Q2

FIGURE

3Composite Insurance Pricing Change — By RegionSOURCE: MARSH GLOBAL ANALYTICS

13.7%

16.1% 16.1%

-0.5%

0.4% 0.4%0.9%

1.4% 1.5%

-1.5%

1.5%2.0%1.9%

1.0%

2.9%

FIGURE

2Global Composite Insurance Pricing Change — By Coverage LineSOURCE: MARSH GLOBAL ANALYTICS

3.3%

4.7%

5.6%

-1.8%

-1.1%-0.7%

Q3 18

3.2%

Q4 18

3.6%

Q1 19

4.7%

Q3 18 Q4 18 Q1 19 Q2 19 Q3 18 Q4 18 Q1 19 Q2 19

Global Property Global Casualty Global FinPro

Q3 18 Q4 18 Q1 19 Q2 19

-0.4%

0.4%1.1%

US UK Cont. Europe

Q3 18 Q4 18 Q1 19 Q2 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 18 Q4 18 Q1 19 Q2 19

Latin America Asia Pacific

Q2 19

8.0%

1.0%

9.7%

4.8%

6.3%

2.0%

0.5%

3.5%

18.3%

Marsh • 3


US Composite Pricing Increases Across Major Coverage Lines

Insurance pricing in the second quarter of 2019 in the US increased by nearly 5%, year-over-year (see Figure 4). The general trend was toward a more challenging insurance market for buyers across the majority of coverage lines (see Figure 5).

Property pricing in the US has increased each month since October 2017.

• Property rates in the US increased nearly 10% in the second quarter, twice the level of recent quarters.

• Catastrophe (CAT) pricing increases rose by 14% in the quarter, twice the rate of increase of non-CAT exposures.

Casualty pricing in the US increased for the first time in two years.

• Excess lines pricing rose 6%, with increases for nearly 60% of clients.

• General liability increased slightly less than 1%, with 70% of organizations showing either no pricing change or an increase.

• Workers’ compensation pricing decreased by 1.4% on average in the quarter, although prices increased for 35% of clients.

• For both general liability and workers’ compensation, the percentage of clients receiving a price decrease was the lowest in several quarters.

Financial and professional liability insurance rates in the US increased by 7%,driven by directors and officers (D&O) pricing.

• Financial and professional liability pricing has increased six consecutive years.

• Pricing for public companies D&O increased nearly 13%, with 85% of clients experiencing an increase, the highest percentage of increased accounts in several quarters.

FIGURE

4US Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19

5.8%

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2% -3.1% -2.3% -2.2% -1.9%

0.8% 0.9%1.2%

1.4%

-2.2%

-2.8%

-3.6%

-2.6%

-3.9%

-3.1% -3.0%

-1.5%

-2.6%-2.9%

-0.6%-0.5%0.0%

-0.4%

0.4%

1.1%

4.8%US

Global

Marsh • 5

FIGURE

5US Composite Insurance Pricing Change - By Major Coverage LineSOURCE: MARSH GLOBAL ANALYTICS


-4.8%-6.2%

-5.7%-4.0%

-5.8%-3.8%

-4.8%-3.7% -3.6% -3.8%

3.6% 2.9% 3.0% 3.1%3.8% 4.4%

US

Pro

per

ty

-1.1%-2.1%

-3.4%-2.6%

-3.4% -3.1% -2.1%

0.4%

-2.3% -2.4% -2.8% -3.0%-2.4% -3.2% -2.1%

-1.7%US

Cas

ual

ty

-0.7%

0.4%

-1.1% -0.8%

-2.4% -2.2% -2.5% -2.5%-1.8%

-2.7%-1.6%

0.0% 0.9% 1.1% 1.5%

2.8%

US

Fin

Pro

• The upward pricing movement observed in the first quarter accelerated in the second quarter due to several factors, including:

– Litigation: Increased frequency and severity in both traditional

securities and derivative lawsuits. In addition, event-driven

litigation is expanding claims to areas such as #MeToo, cyber

breaches, social media, privacy, products, and safety.

– Insurer reaction: Many insurers seeking increases on both

primary and excess layers. Insurers are also looking to alter

terms and conditions, and to exit certain lines or segments.

• Cyber insurance pricing increased by 2.5%.

0.8%

9.9%

7.0%


UK Composite Pricing Rises for Seventh Consecutive Quarter

Overall insurance pricing in the second quarter 2019 in the UK increased by slightly more than 6%, year-over-year, driven by increases in property and financial and professional liability (see Figures 6 and 7).

Property pricing increased 3.5% as the UK multinational market remained in a period of transition.

• Slightly reduced competition as some insurers now willing to walk away from major renewals.

• Pricing for midsize companies generally more competitive than larger risks.

Casualty pricing declined 1.0%.

• Rate reductions were generally available; however, insurers becoming more demanding regarding terms and conditions, particularly for data and cyber coverage.

• Fewer rate reductions overall compared to early 2018.

• Motor liability continued to be more challenging with pricing increasing consistently.

FIGURE

6UK Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2% -3.1% -2.3% -2.2% -1.9%

0.8% 0.9%1.2% 1.4%

5.8%


-7.2%-8.5%

-5.0% -5.0%-4.8% -4.8% -4.8% -4.8% -4.2%

-2.7%

0.2%0.8%

1.0%

2.9%0.8%

1.9%

6.3%UK

Global

Marsh • 7

FIGURE

7UK Composite Insurance Pricing Change - By Major Coverage LineSOURCE: MARSH GLOBAL ANALYTICS


-5.0% -5.0% -50% -5.0% -5.0% -5.0% -5.0% -5.0% -5.0%-4.1%

1.1%

-1.6% -1.4%

0.4%

-1.1%

3.0%

UK

Pro

per

ty

-3.7% -3.7%

-5.0% -5.0%-4.2% -4.2% -4.2% -4.2%

-1.7% -0.9%

0.8%

-2.1% -2.2% -2.1%-3.1% -2.7%U

K C

asu

alty

-11.7%

-15.0%

-5.0% -5.0% -5.0% -5.0% -5.0% -5.0% -5.0%

-2.5%

0.7%

3.3%

5.0%

6.7% 6.7% 6.7%

UK

Fin

Pro

Financial and professional liability pricing increased more than 15%, with increases ranging between 5% and 50% in the quarter. Most large, non-US listed clients generally saw increases from 30% to 100%, a trend expected to continue through the rest of the year.

• Some variability in pricing by segment as larger organizations generally saw greater increases.

• There has been a market-wide deterioration in claims developments, impacting pricing.

• The surge in US securities claims since 2016 has created challenges in certain market segments.

• Few new market entrants in 2019.

-1.0%

3.5%

15.0%


Latin America Pricing Increases in all Major Product Lines

Insurance pricing in the second quarter of 2019 in the Latin America and Caribbean (LAC) region increased by less than 1%, year-over-year (see Figures 8 and 9).

Property pricing increased slightly (0.3%) in the second quarter and has fluctuated within a narrow band of -1% to +1% for five quarters.

• CAT risks, which are more dependent on the international market, continued to see slight increases.

• Non-CAT property pricing moved within a very narrow band across the region of -2% to +2%.

• Chile continued to show the largest increases across both property categories.

Casualty prices rose by nearly 1%, and have increased in the low- to mid-single digits every quarter for almost three years.

• Auto liability pricing increases slowed from prior quarters. Mexico was the only large market country reporting an average price increase in the quarter, a marked difference from prior quarters in which nearly all large countries reported increases.

• Pricing for general liability generally fell within a range of -5% to +5% across most LAC countries.

Financial and professional liability pricing increased more than 1% in the quarter, the region’s eighth straight quarterly increase.

• Financial and professional liability pricing increases were moderate in most countries.

• The average increase was driven in part by pricing for financial institutions in Brazil, which showed increases of 5% to 10%, and

D&O in Colombia, which was up more than 10%.

FIGURE

8Latin America Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

5.8%

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2%

-3.1%

-2.3%-2.2%-1.9%

0.8% 0.9% 1.2%1.4%


-3.9%-3.4%

-4.5%

-5.5%

-2.9%

-3.5%

-0.5%

-2.3%

-0.4% -0.9%

3.0%

0.8%

0.3%0.9%

1.4% 1.5%

0.5%

LAC

Global

Marsh • 9

FIGURE

9Latin America Composite Insurance Pricing Change - By Major Coverage LineSOURCE: MARSH GLOBAL ANALYTICS


-4.9% -4.4%

-5.7%

-7.4%

-4.2%

-5.9%

-4.2%-5.0%

-3.6%-3.9%

3.1%

-1.0% -0.6% -0.4%

0.5% 0.1%

LAC

Pro

per

ty

-1.9% -2.3%-2.9%

-2.4%

-0.8%

0.9%

6.6%

3.3%

6.1%5.1%

3.3%4.3%

1.6%

3.0%

2.2%

3.6%

LAC

Cas

ual

ty

-2.2%

1.9%

0.4%

-0.4% -0.3% -0.4%

2.1%

-1.6% -1.1%

1.1% 0.6%1.5%

3.2%

1.5%

7.2%

2.1%

LAC

Fin

Pro

0.8%

1.4%

Marsh • 10

Continental Europe Pricing Increases for Third Consecutive Quarter

Insurance pricing in the second quarter of 2019 in Continental Europe (CE) increased by 2.0% year-over-year, driven primarily by property insurance (see Figures 10 and 11).

Property insurance pricing in CE rose more than 4%, the third consecutive quarter of increases and the longest trend of pricing increases in five years.

• Pricing for CAT risks increased single digits across the region and in most major CE countries.

• Non-CAT property pricing showed variability. Most major markets had slight increases; smaller countries reported either stable pricing or slight decreases.

• Pricing increases across CAT and non-CAT risks were largely attributed to a number of major insurers re-underwriting their portfolio and reducing exposures, combined with a broader reduction in available capacity.

Casualty insurance pricing decreased 0.4% and has declined in 22 of the last 24 quarters, generally by 1% to 2% each period. In the last three quarters, average decreases have been less than 1%.

• Auto/motor liability pricing generally increased in the quarter by low-single digits in most CE countries — the only casualty product to show consistent increases across the region.

• General liability pricing varied, but was generally stable or showed slight decreases in the major markets such as Belgium, France, Italy, and Spain.

• Employers’ liability pricing varied across the region within a

narrow band, from stable to decreases in the low-single digits.

FIGURE

10Continental Europe Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

5.8%

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2% -3.1% -2.3% -2.2% -1.9%

0.8% 0.9% 1.2%1.4%


-5.2%

-4.5%

-5.1%

-4.0%

-2.6%-3.0%

-4.2% -4.3%

-2.3%

-3.1%

-1.1%-0.8%

-1.5% -1.5%

1.5%2.0% 2.0%

CE

Global

Marsh • 11

FIGURE

11Continental Europe Composite Insurance Pricing Change - By Major Coverage LineSOURCE: Q1 2019 GLOBAL INSURANCE MARKET INDEX


-7.8%-6.9%

-8.2%-9.1%

-4.5% -5.5% -5.6% -5.3%

-1.9%-3.2%

0.3% 0.1%

-1.3% -0.4%

3.1%4.2%

CE

Pro

per

ty

-5.1%

-3.0% -3.2%-2.5% -2.8% -2.9%

-2.1% -1.9% -1.5%

-3.7%

-1.6% -2.2% -2.6%

0.9%1.7%

CE

Fin

Pro

-2.1% -2.2% -2.2%

2.9%

-0.2%

0.0%

-3.2%-4.0%

-3.1% -3.6%-1.5% -1.6% -1.4%

-2.3%

-0.3% -0.9%

CE

Cas

ual

ty

-4.7%

-0.4%

4.1%

1.3%


Pacific Trend of Pricing Increases Continue

Overall insurance pricing in the second quarter of 2019 in the Pacific region increased 18%, continuing an upward pricing trend that started in 2015 (see Figures 12 and 13).

Property insurance pricing increased nearly 18% in the second quarter, the sixth consecutive quarter of year-over-year double-digit increases.

• CAT and non-CAT clients in Australia and New Zealand saw generally double-digit increases, with pricing up 10% to 20% for many clients.

• In addition to high hazard business, real estate, mining, and downstream energy were more challenging in the quarter, with reduced capacity and appetite from major insurers.

Casualty pricing increased by almost 6% in the quarter, continuing the trend of mid-single digit increases observed for three years.

• Pricing continued to rise at a fairly consistent rate, although signs of a more competitive environment are starting to appear.

• Pricing for all sub-products for Australia and New Zealand was either stable or increased in the single digits.

Financial and professional liability pricing rose by nearly 28% in the second quarter, marking eight straight quarters of double-digit increases.

• The largest increases were experienced for D&O side-C exposed listed companies, where many companies experienced increases of 100% or more. Price increases the result of persistent securities action claims.

• Financial services professional indemnity experienced increases of a similar magnitude, driven in large part by claims arising from the Royal Commission into Misconduct in the Banking,

Superannuation and Financial Services Industry.

FIGURE

12Pacific Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

5.8%

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2% -3.1% -2.3% -2.2% -1.9%

0.8% 0.9% 1.2%1.4%

Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

-16.7%

-9.7% -9.7%

-4.2%

-1.8%-2.5%

-2.2%

2.2%

6.3%

8.1%

10.4%11.6%

13.7% 13.7% 16.1% 16.1%

18.3%Pacific

Global

Q2 19

Marsh • 13

FIGURE

13Pacific Composite Insurance Pricing Change - By Major Coverage LineSOURCE: MARSH GLOBAL ANALYTICS


Pac

ific

Pro

per

ty

-6.9%

-3.2% -3.2% -3.2%

0.0%

-0.9%

0.4%

2.7% 2.7%4.8%

6.4%5.7% 5.7% 5.7% 5.7% 5.7%

Pac

ific

Cas

ual

ty

-6.7%

-3.3% -3.3% -3.3%

-1.7%

1.7% 1.7%

6.7% 6.7%

12.5%

15.8%

Pac

ific

Fin

Pro

15.0%

23.3% 23.3% 25.8% 25.8%

• The claims environment has led a number of major insurers to retreat from the marketplace, with others taking much firmer positions on price, capacity, and retentions.

• Much Australian business is placed into the London market, where similarly challenging conditions were evident, resulting from the claims environment, and, more broadly, the impact of the Lloyd’s Syndicate Review and the resultant contraction

in capacity.

-25.0%

-15.0% -15.0%

-2.5%-5.0%

0.0%

7.5% 7.5% 9.5%12.5%

14.5%

17.8%

-5.0% -5.0%

12.5% 12.5%

14.5%

5.7%

27.5%


Asia Composite Pricing Shows Highest Increase in Five Years

Insurance pricing in the second quarter of 2019 in Asia increased by nearly 4% year-over-year, the largest composite increase in the region in five years (see Figures 14 and 15).

Property insurance pricing rose 5% as international carriers sought pricing increases across the region.

• CAT pricing increased double digits in several Asian countries, including Singapore, Hong Kong, and India.

• Non-CAT pricing showed variability in the region, ranging from single-digits decreases to single-digit increases.

• CAT losses in the fourth quarter 2018 impacted many insurers’ profitability, and price corrections have occurred at an accelerated pace. Certain Lloyd’s Syndicates have withdrawn from lines of business, impacting the Singapore hub.

Casualty pricing declined 0.4%, continuing a trend toward stable after several years of moderate decreases.

• The moderation of casualty pricing was due in large part to increased pricing in auto/motor liability which consistently ranged from the low- to mid-single digits.

• Increases in auto pricing were generally balanced by decreases in general liability observed across the region, with pricing down as much as 10% in some countries.

FIGURE

14Asia Composite Insurance Pricing ChangeSOURCE: MARSH GLOBAL ANALYTICS

5.8%

2.1%

3.0%

-4.4% -4.8% -5.0% -3.8% -3.6% -3.2% -3.1% -2.3% -2.2% -1.9%

0.8% 0.9% 1.2%1.4%


-2.6%

-6.8% -6.9%

-5.7%

-5.1%

-3.3%

-2.7%-3.1% -3.2%

-0.6% -0.6%

-1.8%

-0.4% -0.5%0.4% 0.4%

Asia

Global

Marsh • 15

FIGURE

15Asia Composite Insurance Pricing Change - By Major Coverage LineSOURCE: MARSH GLOBAL ANALYTICS


-2.7%

-8.1% -8.2%

-6.2%-4.9%

-2.5% -1.2% -1.8% -2.4%-0.7%

0.1%

-1.4% -0.4% -0.2%

0.7% 0.6%

Asi

a P

rop

erty

-2.6%-4.3% -4.2%

-4.8%-5.5% -4.9%

-5.8% -5.6%

-5.2%-4.2%

-1.3%-2.7%

-0.5% -1.0% -0.5% -0.4%

Asi

a C

asu

alty

-2.1%

-4.9%-4.6%

-5.8%-4.9% -4.8%

-5.8%

-3.4% -3.1% -2.9% -2.2%-0.5% -1.5%

0.4% 0.2%

Asi

a Fi

nP

ro

-5.1%

Financial and professional liability pricing increased 3%, with insurer capacity restrictions and reduced appetite, although capacity in Asia remains more than adequate for the majority of risks.

• Financial and professional liability insurance markets in Asia remain generally flat, but there were challenges in some limited segments — mainly D&O risks with US listings — and particularly for China-based risks.

• Insurer competition started to decline for financial institution clients, especially on risks with claims or notification activity.

• Cyber insurance pricing generally held flat on renewals. Signs of more cautious underwriting and higher prices being sought on new business.

• Some tightening on the scope of cyber coverage, with insurers resisting broader system failure wordings, which had been secured previously on Asian risks.

-0.4%

4.9%

2.7%

Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman.

This document and any recommendations, analysis, or advice provided by Marsh (collectively, the “Marsh Analysis”) are not intended to be taken as advice regarding any individual situation and should

not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update

the Marsh Analysis and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters

are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, tax, accounting, or legal advice, for which you should consult your own professional

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are inaccurate or incomplete or should change. Marsh makes no representation or warranty concerning the application of policy wording or the financial condition or solvency of insurers or reinsurers.

Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Although Marsh may provide advice and recommendations, all decisions regarding the amount, type or terms of

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insights august 2019 global insurance prices continue to rise · global commercial insurance prices...

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