Global commercial insurance pricing up across lines in Q4
Marsh uncovers the lines with the biggest gains as well as what 2021 has in store.
Average worldwide prices for commercial insurance increased 22% during the final quarter of 2020, according to the Global Insurance Market Index by Marsh, which reported this was the largest year-on-year increase since the index began tracking the data in 2012.
While the fourth quarter saw pricing hit a record, the gains were in line with preceding periods, Marsh reported, with the third quarter seeing a 20% gain and 19% growth in Q2 2020.
Further, prices appear to be leveling off for some lines in certain regions. For example, in the U.S., property insurance and D&O are showing signs of moderate increases, while P&C lines in Central Europe, Latin American and the Caribbean are displaying similar trends.
Latin America was the only region to not see double-digit rate increases during the period, according to Marsh. The U.K. saw the biggest gains at 44%, followed by the Pacific’s 35% leap. The U.S. saw average prices creep up 17%.
“The global insurance marketplace was very challenging in 2020, and we expect these conditions to persist through the first half of 2021. Although we are seeing signs that price increases are beginning to plateau in some lines, our clients continue to face tough trading,” Lucy Clarke, president of Marsh JLT Specialty and Marsh Global Placement, said in a release.
General liability following excess markets
During the quarter, general liability (GL) coverage began to track alongside the significant rate gains seen in the excess liability market, according to Marsh, which anticipates rates for GL lines to grow 4%-11% and potentially higher for certain business classes.
Umbrella lines, which Marsh estimates could see rate gains from 25% to more than 50% this year, continue to see reduced capacity and coverage-offering constrictions. Both of these issues are being buoyed by social inflation, COVID-related loss concerns and the fact that these coverages have long been underpriced.
This is leading carriers to limit capacity at higher prices while avoiding “severity-prone” industries such as transportation, construction and health care.
Looking at auto coverage, which continues to be the most stressed line, rates are expected to increase in the 10%-20% range. Insurers’ desires to write large fleets remain on the decline, Marsh noted.
Public & private D&O face rate hikes
Although the final quarter of 2020 saw some easement in the U.S. D&O market, rates were still up 43.5% for public D&O liability and Side A coverages, Marsh reported. However, the second and third quarters each saw U.S. rates grow by more than 50%. Overall, 95% of Marsh’s D&O clients saw rate increases in the fourth quarter and 15% reduced limits.
Other regions are seeing harder markets, such as the U.K., where rates are expected to continue upward trends throughout the year.
Concerning private D&O liability, premiums are anticipated to increase 15%-30%, according to Marsh, which noted excess layer premiums are also seeing significant increases.
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