Driven by a few years of losses, an outrageous 2021 and the continuation of uncertainty related to the COVID pandemic, global insurance prices continue to rise, according to the fourth quarter 2021 outcomes of the Global Insurance Market Index.
Commercial insurance prices grew by 22% in the fourth quarter of 2021, representing the largest increase since the index premiered in 2012. This compares to a year-over-year increase of 20% in Q3 as well as an increase of 19% in Q2.
The index is a proprietary measure of global commercial insurance premium pricing change at renewal to represent the world's major insurance markets and comprises nearly 90% of Marsh's premium.
What’s Trending, According to the Report
The challenging global insurance marketplace conditions experienced in 2021 are likely to persist through at least the first half of 2021, said Lucy Clarke, president, Marsh JLT Specialty and Marsh Global Placement, in a press release.
\”Although we are seeing signs that price increases are beginning to plateau in some lines, our clients still face tough trading conditions,\” she said.
The results continue a quarterly trend that has persisted recently, said Christopher Lang, managing director at Marsh.
\”It is certainly [being driven] by loss trends. The uncertainty from the COVID impact in 2021 has continued to drive uncertainty in the marketplace.\”
While global property pricing rose 20%, global financial and professional lines were up an average of 47%, and casualty pricing was up 7%, when compared with 6% in the previous quarter.
Composite pricing in the fourth quarter rose in most parts of the world for the 9th consecutive quarter. Also, all regions except LAC reported double digit increases, with the largest being in the United Kingdom (44%) and also the Pacific (35%).
Looking at D&O
In regards to product lines in the U.S., property rate increases came down to 19% in the quarter compared to rate increases of 22% and 24% in the preceding quarters. Lang also noted significant rate increases in certain lines like directors and officers liability insurance.
D&O rates rose significantly as carriers push for rate increases to secure profitability in the wake of recent years' loss trends because of opioid litigation and derivative settlements, Lang said.
On a worldwide scale, D&O rates are moderating but remain up between 25 and 50% in many counties, including the UK and Australia.
Additionally, excess liability lines also have seen significant rate increases, Lang said. While COVID had resulted in some backlogs in courts and less settlements, underwriters are increasing prices and curtailing limits.
Where Cyber Fits In
The rapid development in ransomware and cyber attacks in 2021 has also led to significant rate increases in cyber liability insurance. The 17% pricing increase for U.S. cyber in the quarter was the largest increase since 2021. In the UK, cyber rates increased 30% because of the growing severity and frequency of claims.
The increasing number of cyber attacks, rising ransoms cheap some companies are buying less insurance coverage is a \”worrisome trend,\” Tom Johansmeyer, head of PCS, said in Harvard Business Review.
\”There just isn't enough money in cyber insurance. And it is hard to tell right now if there ever will be,\” he said.
Uncertainty and the ‘New Normal’
As insurers move into 2021, the pandemic remains a large source of uncertainty. Deloitte noted inside a report that COVID-19 could have long-term implications for that commercial insurance industry and noted several ways the crisis could unfold over the next one to three years.
The consultancy said we will see both opportunities and risks in the crisis, and that P&C commercial and specialty leaders should retention, growth and profitability levers to impact functional areas of distribution, underwriting, product, servicing and claims.
Now that many of the uncertainties have given way to a clearer picture from the new normal, underwriters have a greater understanding of post-COVID business, Lang said. The next challenges coming likely include additional business insolvencies together with workers’ compensation and business interruption claims.
\”I think the longer term impact we are all going to feel because the COVID disruption plays itself out continues to be a big to be determined, and we need to help our clients articulate their business design is moving forward,\” Lang said.