Global commercial insurance prices rose significantly in the third quarter of 2020, up 20% — the largest year-over-year increase since the beginning of Marsh’s Global Insurance Market Index in 2012.
Pricing challenges in the market have led clients to take on higher retentions, reducing limits, and changing other policy conditions, according to Marsh. Average increases in the United States stayed level from the second quarter at 18%, but the United Kingdom and Pacific region rose to 34% and 33%, respectively. The third quarter marks 12 consecutive quarters of price increases.
“Based on current conditions, we expect the pricing environment to remain challenging in most regions and across most products, with the firming market extending through the first half of 2021,” Marsh commented.
Globally, rate increases in the financial and professional lines showed the most upward growth at an average 40%, up from 37% in Q2. For property coverage, increases hit an average 21%, followed by an average 6% for casualty coverage. Marsh added that loss history, location, and other client-specific details have an impact on the individual price changes.
In the U.S., property pricing rose an average 24%, with 85% of Marsh client renewals seeing increases. Insurers have pressed for higher deductibles and tighter terms and conditions. Many are looking to cut or eliminate non-physical damage coverage. In response to higher prices, over 15% of buyers upped their retentions and 20% reduced their limits. Larger accounts tended to see higher prices, with 35% seeing an average increase versus 20% for smaller accounts.
Casualty price changes were more moderate, at an average 6%, but larger, complex umbrella and excess risks continue to experience increases ranging typically between 30% and 60%, but sometimes higher. Marsh noted that limits on primary general liability policies are trending higher in response to lead umbrella insurers looking for higher attachment points.
Financial and professional liability prices showed a higher average increase at 28%, mainly due to D&O coverage. Even with higher retentions and lower limits, more than 90% of clients saw average increases of over 50%. Marsh reported new capacity entering the D&O, but “little movement” of risks as incumbent insurers retained their clients.
Notably, cyber insurance prices showed their largest average increase since 2016 at 11%. Marsh reported that over 15% of cyber clients boosted their limits.
Editor Erin Ayers can be reached at [email protected]