Rates continue to soften in Q3
Global insurance pricing fell in the third quarter of 2014, marking the sixth consecutive quarter of rate decreases.
According to the Marsh Global Insurance Index, the slide in rates has accelerated from the beginning of the year, falling 2.8 percent for the third quarter of 2014, compared to the third quarter of 2013.
Marsh said that property rate levels have shown the largest decreases globally. In the US, major catastrophes have been limited, continuing a period of stability since Superstorm Sandy struck in October 2012.
“With conditions remaining favourable to buyers, insureds are researching alternative risk management solutions, including catastrophe bonds and collateralised insurance solutions — and many insureds are also seeking to secure multiyear policies to lock in currently low rates,” said Duncan Ellis, Marsh’s US property practice leader.
Overall, casualty and financial products lines were more stable.
“Increasing regulation continues to be a top concern for banks globally, given the cost of regulatory investigations,” said Siobhan O’Brien, managing director in Marsh’s FINPRO practice. “In addition, recent cyber-attacks on several high-profile banks have also caused increased concern for financial institutions.”
The US was essentially flat overall for the quarter, while rate levels in Latin America, Asia-Pacific, the UK, and Continental Europe traded in a range of -4 percent to -6 percent.
Marsh added that pricing is becoming increasingly sophisticated and analytical insights into new versus renewal pricing trends is just one aspect to gaining the CLTV benefits associated with renewal business by writing new business at a discount.
“Other pricing methods — such as predictive analytics — are making the inexorable march from personal to commercial lines and further accelerating competition risk by risk. Over time, this sophistication should shorten the insurance pricing cycle from years to months. Our current 18-month downward trend in rate levels could see a quicker, albeit muted, turnaround in the coming quarters,” said Marsh.
