Marsh says rise of insurance rates slowing, predicts ‘tighter’ U.S. storm policies

In the aftermath of Hurricane Sandy, insurance carriers will be “less agreeable” to dropping property insurance rates for U.S. clients, while Canadian firms are experiencing “stable” rate changes in liability and errors and omissions insurance, according to a recent report from New York-based brokerage Marsh Inc.

In the fourth quarter of 2012, “global insurance rates rose at a slower rate than in the previous quarter,” Marsh stated in its Global Insurance Market Quarterly Briefing for December 2012.

“For U.S. insureds, decreases in property insurance rates are considered unlikely in early 2013, especially for those with losses from (Hurricane) Sandy,” Marsh said in the briefing. “Flat or declining premium rates at renewal typically will be reserved for insureds with favourable loss histories and low catastrophe exposures.”

The briefing predicts that in the first half of 2013, insurers will likely be “less agreeable to rate decreases and to tighten policy wordings around flood, storm, surge and windstorm.”

The average insurance limit on U.S. commercial flood policies was $50.6 million in 2012, with the average deductible “just over $800,000.”

Marsh included numbers from its risk management global insurance index, which is a composite, or weighted average of rate change activity over the previous four quarters. The index, based at 100.0 in the second quarter of 2012, was 100.9 in the third quarter and 101.2 in the fourth quarter.

“The average rate change at renewal was 1.2% in the fourth quarter, compared to the 1.4% seen in the third quarter,” Marsh said.

The report also discussed rate changes for financial institutions’ liability policies, which are affected by insurance carriers’ concerns about the global economic situation and increased regulatory scrutiny.

Marsh says that worlwide, rate increases for directors’ and officers’ liability is “driven by persistent concern about systemic risks affecting financial institutions.”

A chart published with the report breaks down rate trends by country. It describes as “stable” the typical rates changes in Canada for general liability, professional liability, financial institutions and directors and officers.

Rates have been “broadly flat” for cyber and privacy insurance, Marsh says, noting that advances in technology have brought in new risks, such as theft of confidential information, the failure to secure critical business functions from disruption and the liability risks of online content.