Cyber rate rise slows, financial lines fall amid global headwinds

Pricing in cyber insurance rose at a slower pace while certain financial and professional lines decreased for the second time in around five years as companies faced a tough operating environment in the wake of a global economic slowdown. Experts at  Marsh believe the impact of inflation on asset values and claims costs will remain the main concern for insurers at the upcoming renewals in most regions.

Global commercial insurance prices increased 4% in the fourth quarter of 2022, down from a 6% increase in Q3 and a 9% increase in Q2, continuing a trend of moderating increases that began in Q1 2021, according to Marsh’s latest Global Insurance Market Index.

Pricing increases moderated in most regions with the exception of financial and professional lines, which decreased for the second time since Q3 2017. The Marsh index measured an overall decrease in certain financial and professional lines, most notably directors and officers insurance.

In the US, composite pricing increased by 3%, down from 5% in Q3 of 2022, while rates in the UK were up by 4%, down from a 7% increase in Q3. Rates increased in the Pacific by 5%, in Asia by 2%, and in Continental Europe by 6% (all the same as the previous quarter). In Latin America and the Caribbean prices rose by 7%, a rise on the 5% increase recorded in Q3.

Global property insurance pricing was up 7% on average in the fourth quarter of 2022, compared to a 6% increase in the previous quarter; casualty pricing was up 3% on average, compared to 4% in Q3.

For the second consecutive quarter, overall pricing in financial and professional lines fell. Driven by further rate reductions in the US, UK and Australia average pricing declined by 6% in Q4, compared to a 1% decrease in Q3.

Globally, cyber insurance pricing increased 28% in Q4 2022, compared to a 53% increase in Q3. In the largest cyber insurance markets, the rate of increase continued to moderate significantly with prices rising by 28% in the US and 34% in the UK, compared to 48% and 66%, respectively, in the prior quarter.

Marsh's report highlighted concerns about the impact of inflation on asset values and claims costs, which it believes will continue to be a focal point for insurers at renewal in most regions.

Lucy Clarke (pictured), president, Marsh Specialty and Global Placement, Marsh said: “After a challenging 2022, our clients will continue to face a tough operating environment in 2023. With a slowdown in the global economy, in addition to ongoing inflation and geopolitical tensions, many clients face significant headwinds.

“Pricing for property risks continues to be impacted by the high level of losses in 2022, especially resulting from Hurricane Ian. We are working with our clients to examine a wide range of options, including the increased use of captives and alternative risk financing options, to address their needs and to obtain the optimal outcome for them from the market.”

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