Commercial insurance prices peaked but starting to plateau; tough conditions to persist

Global commercial insurance prices saw the largest increase on record in the fourth quarter of 2020, but for some lines of business it may be starting to "plateau", according to Marsh's insurance market index. Analysts expect the tough market conditions seen in 2020 to continue through the first half of 2021.

The latest index shows that commercial insurance prices rose 22 percent in Q4, largely driven by property insurance rates and financial and professional lines.

The increase was the largest since the index was launched in 2012, following year-on-year average increases of 20 percent in the third quarter and 19 percent in the second quarter of 2020.

Global property insurance pricing was up 20 percent on average, slightly down from the 21 percent increase experienced in the third quarter. However, global financial and professional lines were up 47 percent on average, up from a 40 percent increase the previous quarter.

Casualty pricing was up 7 percent on average, compared to a 6 percent increase in the prior quarter.

Marsh said composite pricing in Q4 increased in all geographic regions for the ninth consecutive quarter, with the UK and Pacific seeing the highest increases.

All regions, except Latin America and Caribbean (LAC) (9 percent), reported double-digit price increases, led by the UK (44 percent), Pacific (35 percent), and the US (17 percent). The rate of increase in Q4 either declined or remained the same in all regions outside the UK and Pacific.

The public company directors and officers (D&O) coverages continued to see large increases, especially in major markets such as the UK and Australia.

However, the broker noted that property insurance and directors and officers (D&O) pricing in the US showed signs of moderating increases, and similar trends can be seen in certain property and casualty lines in Continental Europe and LAC.

Regionally, Continental Europe, Asia, and LAC have now experienced moderate levels of price increases for three quarters.

“The global insurance marketplace was very challenging in 2020, and we expect these conditions to persist through the first half of 2021," said Lucy Clarke, president of Marsh JLT Specialty and Marsh Global Placement.

Clarke added that "although we are seeing signs that price increases are beginning to plateau in some lines, our clients continue to face tough trading conditions."

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