Commercial insurance pricing has declined for the eighth consecutive quarter, according to the latest
Marsh Global Insurance Market Quarterly Briefing, and it’s been driven in large part by an oversupply of capital.
The briefing said the dynamic was supported “whether looking at the growth in insurer surplus levels or the increased capacity deployed in new geographies and products.
“Coupled with strong underwriting performance, this overcapitalized position is behind the softening market.”
The report said consolidation in both insurance and reinsurance markets had accelerated over the last several quarters and was a trend which was expected to continue.
“[This trend] is a clear sign that the industry is experiencing excess capital levels,” the briefing said.
There were decreases across regions and in most major lines with cyber being the exception.
Asia-Pacific experienced the largest composite rate decreases, followed by Continental Europe, the UK, Latin America, and the US.
In insurance lines, property showed the largest rate declines, on average, across all regions in the first quarter, led by Continental Europe and Asia-Pacific.
“It has been another benign year for major catastrophe losses, and the abundance of capital, in the primary markets and in reinsurance capacity, including new alternative capital, is driving increased competition, forcing rates lower,” said David Batchelor, president of Marsh’s international division.
Casualty insurance rates experienced a more modest decrease than property across regions.
Cyber in the US, however, was one of the few areas where average rates increased.
The Briefing outlined that capacity for cyber remained strong and was expanding, with carriers continuing to innovate on policy language and examine the different coverage types that companies might require.
However, the risk’s dynamic nature made pricing challenging due to the market’s competing forces, which included a rapid growth in loss activity.
“Many companies are interested in more coverage and higher limits,” said Tom Reagan, Marsh’s cyber practice leader.
“At the same time, the market is looking for better segmentation models to price the exposure appropriately. Given the nature of the uncertainty about future loss experience currently existing for cyber, rate levels have generally been increasing, even for companies without meaningful cyber losses to date.”
