Global insurance rates decrease for the seventh consecutive quarter

The Marsh Global Insurance Index showed rate decreases for the fourth quarter of 2014 compared to the fourth quarter of 2013, marking the seventh consecutive quarter of decline.

According to the quarterly briefing report, released on March 2, the property line showed the largest renewal rate decreases in the quarter across all regions. Continental Europe saw the largest decreases, followed by Latin America and Caribbean and Asia-Pacific. “The abundant supply of capital in the global marketplace and the relative decrease in catastrophe losses fueled the decline in property rates in the fourth quarter,” said Dean Klisura, Marsh’s global industry specialties and placement leader, in the report.

Casualty insurance rates, on average, also decreased in all major regions. In the UK, the entry of new insurers and an increase in capacity affected lines such as general liability and motor/auto liability. “Insurers face significant growth targets, which increases competition and, in turn, fuels the opportunity to negotiate broader coverages and/or rate decreases,” added Matthew Rolph, Marsh’s UK specialties placement leader.

Headline cyber losses in the United States foreshadowed hardening in the fourth quarter for this line of business, evidenced by a modest rise in rates, one of the few areas of increase, the report noted. While other financial and professional liability lines — for example, directors and officers and errors and omissions — showed slight decreases in the fourth quarter in the U.S., overall renewal rates for financial institutions remained essentially flat. [click image below to enlarge]

In 2014, underwriting results were generally strong, with most insurers posting better year-over-year results. A low level of insured natural catastrophes losses for 2014 — roughly half the 10-year average and almost 25% lower than 2013 — helped drive these results, the briefing said. In addition, despite the impact of Superstorm Sand in the northeastern U.S. in 2012 and other regional events, there have been 15 straight quarters of benign catastrophe losses globally.

In the property line, this caused an acceleration of rate decreases in the fourth quarter — rates were down 6% globally versus a decrease of 4.6% in the third quarter. Casualty rates were also down globally in the fourth quarter.

In the Asia-Pacific region, where renewal rates decreased by an average of 5.5% overall in the fourth quarter, insurance pricing remains highly competitive. “We are seeing competitive pricing across most product lines, with continued pricing pressure as more competition enters the market,” said Martin South, CEO of Marsh Asia-Pacific. “Insurers continue to have reasonably profitable results, which is helping keep overall price levels down.”

The report noted that as insurers increasingly turned to sophisticated predictive analytics, underwriters’ pricing and risk selection decisions are becoming more refined. On the reinsurance side, the influx of new capital has made significant inroads, the report said, noting that the impact has been the greatest in the U.S. and Asia-Pacific. [click image below to enlarge]

“Looking ahead, the market should remain competitive in 2015, barring unforeseen changes from a large catastrophe or other event,” the report said. “Fortunately, natural catastrophes have been at historically low levels, and other unexpected large loss events have been notably absent in recent years.”