In the latest Global Insurance Market Index published by Marsh, it was revealed that global commercial insurance rates were flat in the second quarter of 2024, down from a 1% increase in Q1 2024 and marking the first time since Q3 2017 that the global composite rate has not increased.
However, while rates decreased for financial and professional lines and cyber, they remained flat for property insurance, and increased across casualty lines globally, reflecting the need for the insurance market to continue to help clients navigate an increasingly complex and interconnected risk environment. It is this complexity that Nina Arquint (pictured) has a bird’s-eye view of in her role as EMEA CEO of Swiss Re Corporate Solutions as she noted that there is no “one APAC” or “one Europe”.
Working across so many different markets, you get to see the different interplay of risks, regulations and rate trajectories across multiple jurisdictions, which is where data availability and the power of having one source of data to create scenario analysis becomes so critical. Data has become a critical tenet of providing valuable, accessible risk services to clients, as it’s through data analysis that you are equipped to understand and plan for the potential exposures your organisation is facing.
Looking at the Marsh index for the UK, Arquint noted that it’s important to recognise that while the composite rate is holding steady, it still remains more than twice as high as it was at the start of the hardening market cycle in 2018. “That gives us a picture of where we are in the overall market cycle right now,” she said. “Meanwhile, in continental Europe, the index was up 1% in Q2 2024 so it’s still climbing, even though it has slowed down significantly.”
Overall, it’s clear that while the commercial P&C insurance market is at the end of a prolonged hard market, it’s still not in a softening market territory, with the exception of certain lines of business including executive risk and cyber.
The expectation is that, throughout 2024, the market will continue to see a slowdown – or in some cases a cessation – in P&C insurance price increases. “In the medium term, the risk environment still justifies pricing risk based on fundamentals rather than commercial factors,” Arquint said. “That’s also why a significant softening of commercial insurance pricing is, in our view, unlikely in the main lines of business. Something I think is extremely important for us, as carriers, to focus on is the increasing disconnect we have between nominal rate change and risk-adjusted price adequacy."
“In our risk environment, it’s absolutely critical not just to look at the nominal rate changes because we want to be in a sustainable market. And even though the profitability of insurers has advanced in the European markets in 2024, with the return on equity moving to around 7% in 2023, and 11% in 2024, we have to remind ourselves that commercial P&C re-/insurers did not earn the cost of equity in four out of six years since 2017.”
Property has seen a strong market environment for a few years now, which has allowed it to grow significantly. Rate-wise, Arquint said, property is operating at a sustainable level but its sustainability is not dictated solely by rate, but also by making the right investments in underwriting talent.
“Having the right talent with the right skill sets and capabilities to underwrite risks, and who have a very deep understanding of the different risks at play on the property side across different industries is so important,” she said. “Also, it comes down to risk engineering because we’re hearing from our customers that risk engineering is so critical to them.”
Clients – particularly the multinationals on the international and programs business side – are not just focusing on rate, they want high-quality servicing from their insurance partners, they want access to market-leading tech and they want expertise with regards to compliance support. And they’re increasingly fixing an eye to how their risk profile will evolve, which is where risk and data services are coming into their own.
“I think it’s on us as an industry to think about possibilities of sharing more loss information,” Arquint said. “If we could share more loss information and be able to take it into account in the pricing, it could be a way of reducing the volatility we’re seeing in D&O rates, which are not comparable to other lines of business.”
In casualty, she said, what’s interesting to see is the bifurcation of this fractured market, with the risk in US exposure on one side – where you still continue to see rate corrections, and reductions in limits and capacity. But on the other non-US exposed business side, conditions are becoming more competitive.
Meanwhile, the engineering and construction markets are facing a variable cycle with regards to investments and the emerging risks they’re seeing in renewable energies. Overall, she expects to see stable rates at a sustainable level over the next phase, tempered by an increase in competition – especially in the renewable energy sector – as the significant opportunity for new investment reshapes the market.
