Global Insurance Markets: Pricing Increases Moderate in Second Quarter

Global Insurance
Markets: Pricing
Increases Moderate
in Second Quarter
July 2021
2 Global Insurance Market Index Q2 2021
Global commercial insurance prices rose 15% in the second quarter of 2021, the fifteenth consecutive quarter
of price increases, continuing the longest stretch of increases since the inception of the Marsh Global Insurance
Market Index in 2012 (see Figure 1).* It appears, barring unforeseen changes in conditions, that pricing
increases peaked in the fourth quarter of 2020, at 22%.
01| Global insurance composite pricing change Pricing increases across most regions moderated due to a generally slower
22% rate of increase in property insurance and directors and officers liability (D&O)
20% insurance. However, property insurance pricing climbed back up in Europe, and
19% both Asia and Latin America and the Caribbean (LAC) saw moderate acceleration
18%
in financial and professional lines rate increases.
Cyber insurance pricing again went against the moderation trend — increasing
15%
56% in the US and 35% in the UK (though accelerating towards 50% during the
14%
latter part of the quarter) — driven by increased frequency and severity of losses.
11% Regionally, composite pricing increases for the second quarter were as follows
(see Figure 2):
8% • US: 12%.
• UK: 28%.
6% • Continental Europe: 13%.
• Latin America and the Caribbean: 4%.
3% • Asia: 6%.
2% 2% 2%
1% 1%
• Pacific: 23%.
-2% -2%
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21
Source: Marsh Specialty and Global Placement
*Note: All references to pricing and pricing movements in this report are averages, unless otherwise noted. For ease of
reporting, we have rounded all percentages regarding pricing movements to the nearest whole number.
02| Composite insurance pricing change — by region
US UK Cont. Europe Latin America Asia Pacific

44%
35% 35%
34%
33%
29%
28%
23%
18%
17%
15%
14% 14%
13% 13%
12% 12%
11%
9% 9%
8%
6%
5%
4%
Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21

Pricing in financial and professional lines again had the highest rate of increase across the It is important to note that reported pricing changes are averages and that the data used to
major insurance product categories (see Figure 3): estimate the changes cover a wide range of clients in terms of size, industry, location, claims
history, and other parameters. Many clients experienced pricing changes that deviated from
• Property insurance: 12%. the average, some higher and some lower.
• Casualty insurance: 6%.
• Financial and professional lines insurance: 34%.
03| Composite insurance pricing change — by major coverage line
Global Property Global Casualty Global FINPRO
47%
40% 40%
34%
21%
20%
15%
12%
7%
6% 6% 6%
Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21 Q3 20 Q4 20 Q1 21 Q2 21

US PRICING: INCREASES CONTINUE, AT SLOWER PACE

Insurance pricing in the second quarter of 2021 in the US increased 12%, year-over-year (see • The market deteriorated for clients heavily exposed to wildfire.
Figure 4). Although pricing continued to increase, the rate of increase slowed for the third
• Insurers continued to scrutinize terms and conditions including deductibles, cyber and
consecutive quarter (see Figure 5).
communicable disease exclusions, and time element extensions.
Property insurance pricing increased by 9%, the fifteenth consecutive quarter of increase. Casualty insurance pricing in the US increased 6%; excluding workers’ compensation, the
increase was 10%.
• Property insurance pricing generally decelerated each month this year; falling from an
18% increase in January to 7% in June. • Competition among insurers intensified for workers’ compensation.
• Clients with significant losses, poor risk quality, or significant exposure to secondary • Excess liability is expected to experience continued rate pressure throughout 2021,
catastrophe (CAT) perils generally experienced above average increases. although more moderate than in 2020.
04| US composite insurance pricing change

22%
20%
US 19%
18%
Global
15%
14%
11% 12%
8%
6%
3%
2% 2% 2%
1% 1%
-2% -2%
05| US composite insurance pricing change — by major coverage line Financial and professional lines pricing increased
25%, driven by cyber and directors and officers
(D&O) liability pricing.
22% 24%
21%
19%
• D&O insurance for publicly traded companies
18%
increased 15%, which was lower than the 27%
15% increase in the first quarter.
13%
10% – Competition in both primary and excess
9%
D&O, with new capacity entering the market,
4% 4% 4% contributed to a downward pricing trend.
US Property
3% 3% 3%
– In both April and May 2021, excess rate increases
were less than primary rate increases; a situation
-4% -4% last experienced in January 2019.
9%
8% 8% – Challenging industry segments include pockets of
7%
5% 6%
life science, technology, and specialty retail.
2% 2%
US Casualty
1% • The size and frequency of excessive fee litigation on

0% 0% defined contribution plans continues to significantly
impact the fiduciary market.
-1% -1% -1% -1%
-2% -2% • Cyber pricing increased 56% in the quarter —
30%
28% 28% including a 68% increase in June — driven by the
23% 25% 25%
frequency and severity of ransomware claims.
15% – Ransom payments frequently exceeded
$US1 million and the resulting costs for
11% business interruption or data exfiltration
7% increased claim payouts.
3% – Many insurers narrowed coverage for ransomware
US FINPRO
2%
1% 1% losses, and tightly managed limit deployment on
0%
any one risk, oftentimes capping at $US5 million.
-2% -2% – Some insurers significantly changed underwriting

-3% strategy while others stopped offering
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 cyber coverage.

UK PRICING: FIFTEENTH CONSECUTIVE QUARTER OF INCREASES

Insurance pricing in the second quarter of 2021 in the UK increased 28% (see Figures 6 and 7). • High-hazard sectors such as food, waste recycling, and heavy chemical/industrial
industries; risks in CAT zones; and organizations with poor loss activity faced the greatest
Property insurance pricing increased 15%. challenges at renewal.
• Larger organizations generally experienced price increases ranging from 15% to 20%; • Business interruption claims due to COVID-19 began to come into focus during the
increases for midsize companies generally ranged from 10% to 15%. renewal process.
06| UK composite insurance pricing change

28%
UK
22%
Global 20%
19%
18%
15%
14%
11%
8%
6%
3%
2% 2% 2%
1% 1%
-2% -2%

07| UK composite insurance pricing change — by major coverage line Casualty insurance pricing increased 7%.
24% • The casualty market continued to transition at a slower

20% pace compared to other lines of business.
18%
16% • Insurers remained cautious in their approach to
15%
renewals, and some looked to impose disease exclusions;
however, this was not consistent across insurers.
10%
8%
6%
• The auto liability market experienced pricing increases,
4%
mostly in the range of 2% to 4%.
UK Property
3%
1% Financial and professional lines pricing increased 57%,
-2% 0%
largely due to D&O.
-1% -1%
-5% -4%
• A number of new insurers entered the D&O market,
7% 7% which seemed to have reached its pricing peak,
6% 6%
5% 5% although some clients saw triple-digit increases.
UK Casualty
4%
1% 3%
• Commercial crime coverage rates typically increased 30%
to 35%. Coverage remained limited, with primary insurers
-2% -1% -2% -2% -2% -1% requesting higher deductibles and premiums.
-3% -3%
90%
• For financial institutions (FIs), the market began to settle
and significant increases slowed. New entrants in the
71% market provided some new capacity and competition,
67% and increases ranged from 35% to 40%.
64%
57%
46% • Cyber insurance rate increases typically ranged
28%
from 35% to 40%, but were generally over 50% by
the end of the quarter, with some clients seeing
23% triple-digit increases.
15%
– Increases were driven by ransomware claims.
7% 7% 7%
5% – There was pressure on self-insured retentions, and
UK FINPRO
3% insurers reduced total capacity deployed across any

1%
one placement.
-3%
-5%

LATIN AMERICA AND CARIBBEAN: PACE OF PRICE INCREASES SLOWS

Insurance pricing in the second quarter in the Latin America and Caribbean (LAC) region • Markets pushed for price increases, asked for more information, scrutinized exposures,
increased 4% (see Figures 8 and 9). Casualty pricing in the region was the only decrease seen and selectively deployed capacity.
in a major product line globally.
• Global carriers generally excluded strikes, riots, and civil commotion (SRCC) from property
programs; local markets continued to provide coverage, except in Chile, as property is
Property insurance pricing increased 6%.
commonly covered standalone.
• Property pricing increased in Brazil, moderated in Chile and Colombia, and remained
constant in Mexico.
08| Latin America composite insurance pricing change

22%
20%
Latin America 19%
18%
Global
15%
14%
11%
8%
6%
4%
3%
2% 2% 2%
1% 1%
-2% -2%

09| Latin America composite insurance pricing change — by major coverage line Casualty insurance prices declined 2%, the only regional
decrease in a major coverage globally.
16%
15% • Local capacity and competition in large countries
14% (Mexico, Brazil, Peru, and Argentina) continued to
10%
9% 9% mitigate casualty pricing increases.
6% 6%
3% • Auto liability exposure and claims drove a reduction
LAC Property in pricing.
0% 0% 0% 0%
• General liability pricing increased in all
-1% -1% major countries.
-4% -4% Financial and professional lines pricing rose 22%.
• The reduction in insurer capacity and appetite

6% continued, particularly for FIs, public D&O, and
5%
4% 4%
3% 3%
distressed companies.
LAC Casualty
2% 2% 2% 2% • Economic and political situations affected insurers’

1% 1%
D&O underwriting.
-2% • Cyber insurance pricing typically increased 20% to
30%, and insurer appetite was restricted due to factors
-4% -4% -4%
-5% including increased frequency and severity of claims
worldwide and in the region.
26%
22% 22% – Cyber markets scrutinized cybersecurity controls.
17% 17% – Insurers generally imposed maximum US$5 million
15% 15% to US$10 million in limits per risk.
– Insurers introduced co-insurance/specific
8%
7% ransomware strategies.
LAC FINPRO
2% 3% 2% 2%
1% 1% 1%
-1%

CONTINENTAL EUROPE PRICING: INCREASES BELOW GLOBAL AVERAGE

Insurance pricing in the second quarter of 2021 in Continental Europe (CE) increased 13% • Insurer competition and capacity increased, particularly for new business, a trend expected
(see Figures 10 and 11). to continue into 2022, barring unforeseen changes in conditions.
• Insurers continued to apply changes in wordings and sought to apply exclusions,
Property insurance pricing in CE rose 18%.
particularly for communicable disease and cyber.
• Property rates increased 18%, which was above the first quarter average; still there was a
softening of rates in some sectors.
10| Continental Europe composite insurance pricing change 22%

20%
19%
18%
Continental Europe
Global 15%
14%
13%
11%
8%
6%
3%
2% 2% 2%
1% 1%
-2% -2%

11| Continental Europe composite insurance pricing change — by major coverage line Casualty insurance pricing increased 5%, the eighth
consecutive quarterly increase.
20% 21%
19%
18% • Excess casualty and US-exposed placements
16% remained challenging.
Cont. Europe Property

10%
• General liability pricing typically increased by
9% single digits, though in some areas the increases
8%
ranged from 15% to 20%.
4% 4% • Auto liability pricing was generally stable.
3%
0% 0% 0% Financial and professional lines

pricing increased 20%.
-2% -1%
-3%
• Average D&O pricing increases in the larger
countries (France, Germany, and Italy) ranged
6% from 10% to over 30%, with higher increases
5% 5% 5% 5%
Cont. Europe Casualty
4% observed on major D&O programs in distressed

3%
1%
sectors or with US exposure.
-1% 0% -1% 0%
• Insurers remained selective in deploying
-2% -2% -2%
D&O capacity.
-3%
-4% • Average pricing increases for FIs and professional
24% liability generally ranged from 5% to over 30%.
23%
22% 22% 20% • Sizeable rate increases continued for cyber, with
carriers reducing exposure, a trend expected
to continue for the remainder of 2021, barring
12% unforeseen changes.
Cont. Europe FINPRO
5%
2% 2%
1% 1%
-2% -2% -2% -2%

-4% -3%

PACIFIC PRICING: INCREASES CONTINUE, MODERATION SEEN

IN PROPERTY
Overall insurance pricing in the second quarter of 2021 in the Pacific region increased 23%, • While rates continued to increase, a trend toward lower increases was evident.
continuing an upward trend that began in 2015 (see Figures 12 and 13).
• Some competition returned to the market for quality, loss-free clients.
Property insurance pricing increased 14%, a moderation from the prior 10 quarters. • Challenges remained for high-hazard industries, risks in CAT zones, and clients with poor
loss records.
12| Pacific composite insurance pricing change
Pacific 22% 23%

20%
19%
Global 18%
15%
14%
11%
8%
6%
3%
2% 2% 2%
1% 1%
-2% -2%

13| Pacific composite insurance pricing change — by major coverage line Casualty insurance pricing rose 18%, the largest year-
over-year increase since 2012.
31% 31%
28% • Casualty pricing continued to increase, with a
23% stronger emphasis on policy wording reviews.
20%
18% 18% 18%
• Major programs underwent substantial restructuring
15% 15%
13% 13% 13% 14% of layers as underwriters changed their appetite for
10% excess layers.
Pacific Property 8% 8%
Financial and professional lines pricing rose
37%, a significant moderation from 48% in the first
quarter, but marking 16 consecutive quarters of
double-digit increases.
18% • D&O liability pricing continued to level out as more

17%
15% excess layer capacity entered the market.
11% • Professional indemnity premiums increased and
8% 9%
6% 6% 6% 6% 6% 6% 6% 6% 6% capacity tightened.
Pacific Casualty
5%
3% • Cyber premiums increased significantly, in line
with the global trend. Capacity reduced and many
programs were not able to complete historical limits.
51%
49%
48% 48%
37%
33% 33%
28% 28%
26% 26%
23% 23%
16%
15%
13%
7%
Pacific FINPRO

ASIA PRICING: PROPERTY INCREASES MODERATE

Insurance pricing in the second quarter of 2021 in Asia increased 6% year-over-year • Insurance markets continued to be attracted to smaller organizations.
(see Figures 14 and 15).
Casualty insurance pricing was generally flat, as it has been for three years.
Property insurance pricing rose 7%, the eleventh consecutive quarter of increase.
• Ample insurance capacity and a benign claims environment helped keep pricing stable.
• Pricing increases continued to moderate across the region from prior quarter. • Challenges continued in product recall and products liability, driven by claims performance
and reduced insurer appetite.
• Local capacity in many jurisdictions remained competitive as clients seeking international
capacity experienced the largest pricing increases.
14| Asia composite insurance pricing change
Asia 22%
20%
19%
Global 18%
15%
14%
11%
8%
6%
6%
3%
2% 2% 2%
1% 1%
-2% -2%

15| Asia composite insurance pricing change — by major coverage line Financial and professional lines pricing rose 24%,
the largest increase since the inception of the Marsh
Global Insurance Market Index in 2012 and the eleventh
consecutive quarter of increase.
18%
16%
12% • Stringent underwriting, reduced capacity, and
10% risk selection, particularly from global insurers,
8% 8%
7% 7% contributed to pricing increases.
5%
• Insurers were highly selective on US-listed D&O;
Asia Property
1% 1% rate increases ranged from 75% to 100% for some

0% 0% 0%
accounts on the primary layers amid limited
insurer appetite.
-1% -1%
-2% • For larger FIs, insurers pushed to increase retentions
and rates and imposed coverage restrictions on the
most challenged risks.
Asia Casualty
1% 1% 1%
0% 0% 0% 0% 0% 0% 0% 0%
• The cyber insurance market faced considerable
pressure on rates and deductibles, with a reduction
-1% -1% -1% in capacity and a narrowing of key coverage, driven
-3%
by significant ransomware losses.
-5% -4% 24%
23%
22%
18%
14%
8%
5% 5%
3%
Asia FINPRO
0% 0%
-2% -1% -1%

-3% -3% -3%

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Global Insurance

02| Composite insurance pricing change — by region

US UK Cont. Europe Latin America Asia Pacific

Source: Marsh Specialty and Global Placement

03| Composite insurance pricing change — by major coverage line

Global Property Global Casualty Global FINPRO

Source: Marsh Specialty and Global Placement

US PRICING: INCREASES CONTINUE, AT SLOWER PACE

04| US composite insurance pricing change

1% • The size and frequency of excessive fee litigation on

-2% -2% – Some insurers significantly changed underwriting

Source: Marsh Specialty and Global Placement

UK PRICING: FIFTEENTH CONSECUTIVE QUARTER OF INCREASES

06| UK composite insurance pricing change

Source: Marsh Specialty and Global Placement

24% • The casualty market continued to transition at a slower

3% insurers reduced total capacity deployed across any

Source: Marsh Specialty and Global Placement

LATIN AMERICA AND CARIBBEAN: PACE OF PRICE INCREASES SLOWS

08| Latin America composite insurance pricing change

Source: Marsh Specialty and Global Placement

• The reduction in insurer capacity and appetite

2% 2% 2% 2% • Economic and political situations affected insurers’

Source: Marsh Specialty and Global Placement

CONTINENTAL EUROPE PRICING: INCREASES BELOW GLOBAL AVERAGE

10| Continental Europe composite insurance pricing change 22%

Source: Marsh Specialty and Global Placement

Cont. Europe Property

0% 0% 0% Financial and professional lines

4% observed on major D&O programs in distressed

-2% -2% -2% -2%

Source: Marsh Specialty and Global Placement

PACIFIC PRICING: INCREASES CONTINUE, MODERATION SEEN

12| Pacific composite insurance pricing change

Pacific 22% 23%

Source: Marsh Specialty and Global Placement

18% • D&O liability pricing continued to level out as more

Source: Marsh Specialty and Global Placement

ASIA PRICING: PROPERTY INCREASES MODERATE

14| Asia composite insurance pricing change

Source: Marsh Specialty and Global Placement

1% 1% rate increases ranged from 75% to 100% for some

-2% -1% -1%

Source: Marsh Specialty and Global Placement

Copyright © 2021 Marsh LLC. All rights reserved. 676775188

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