Commercial insurance rates down globally in most lines of business in 2015 Q2: Marsh

Plenty of global capacity and few low insured loss activity contributed to commercial insurance rates decreasing globally across all regions and in most major lines of business during the second quarter of 2015, Marsh reports.

Released Thursday, Marsh’s latest Global Insurance Market Quarterly Briefing states that “competitive market conditions – characterized by an abundance of global capacity and a lack of large insured loss activity resulting in reported underwriting results with favourable ratios – helped account for the ninth consecutive quarter of rate decrease.”

Overall, the Asia-Pacific region experienced the largest composite rate decrease, followed by the United Kingdom, Continental Europe, Latin America and the United States, reports Marsh, a global provider of insurance broking and risk management solutions. More specifically, for major coverage lines, property insurance showed the largest rate declines, greater than 5%, on average, notes the report. For casualty insurance, rate decreases on average were more moderate, measuring from flat to down 5% across all major regions.

“Global natural catastrophe losses are continuing at historically lower levels, thus helping drive insurer profitability and removing near-term catalysts for increased rates,” states the report. “As modelling improves to gauge the potential impact of other perils, awareness of potential losses is increasing,” it notes. [click image below to enlarge]

Overall, the Asia-Pacific region experienced the largest composite rate decrease, followed by the United Kingdom, Continental Europe, Latin America and the United States

Marsh points out that the pressure to write more premium grows each year. “With several years of historically higher underwriting results, competition within the industry is increasing,” the report notes. “In addition to rate levels decreasing, more innovative coverages are being created as insurers look to differentiate their offerings. Emerging risk issues, such as cyber, provide a means for the industry to grow, especially as overall profitability remains relatively high,” it adds.

“There are newer, emerging risks such as cyber that are creating a need for additional insurance and risk transfer solutions. Given the importance of cyber risk going forward, we will be keeping a close eye on its impact to the overall market environment,” Marsh notes.

Another area seeing increases is transactional risk insurance. Citing the influence of mergers and acquisitions, the report notes that demand for transactional risk insurance continued to grow during the first half of 2015, with an overall increase of 15% year-on-year in terms of limits placed by Marsh.

For the first half of the year, limits of insurance placed globally was about $4.0 billion, private equity policies (as a percentage of policies placed) was 73%, and corporate policies (as a percentage of policies placed) was 27%.

“The U.S. experienced dramatic growth in demand from all sectors, on the back of a record year in 2014. In Europe, real estate deals continued to drive demand, and we are seeing a trend for deal makers to include title insurance as part of the transactions. Larger deal sizes and a great acceptance of this insurance solution buoyed demand in Asia,” the report points out.

Marsh suggests “the growth in capacity and availability in this niche insurance area is yet another example of insurers expanding from traditional property and casualty lines into more complex, solution-oriented specialist classes of insurance.”

Other report findings include the following:

• property insurance rate decreases were led by Asia-Pacific and Continental Europe;

• for casualty insurance rates, Asia-Pacific had the largest decrease, followed by the U.K.; and

• alternative capital continues to flow into the industry and is creating an additional source of risk transfer, fuelling competition and helping to drive rate levels lower.