Commercial rates continue to moderate, cyber 'plateauing', Marsh says

Marsh’s latest pricing monitor shows Australia commercial premium rates continue to moderate, as the pace of increase weakens after many quarters of record-breaking rises.

Overall pricing in the Pacific market, in which Australia makes up 80% of business for Marsh, went up 5% in the three months to September after recording a 7% rise in the prior June quarter.

Pricing globally also increased at a weaker pace, by 6% after chalking a 9% rise in the June quarter, according to the Global Insurance Market Index.

The index says the July-September period renewal pricing change marks the seventh straight quarter of slowing premium rate growth in the Pacific market.

Pricing grew 10% in the first three months of the year and 13% in the December quarter of last year, continuing a downward trend since its peak in the fourth quarter of 2020.

“The moderating trend of rate increases continued in Q3 with increases in Property and Casualty slightly down on the prior quarter,” Head of Global Placement Asia & Pacific John Donnelly told insuranceNEWS.com.au.

“The biggest movement was in Directors’ and Officers’ where premium reductions are the norm with more capacity entering the market thus generating competition.”

Rates for Directors’ and Officers’ (D&O), a sub-sector of financial and professional lines, declined again after falling 5% in the prior June quarter. The June rate decline marked the first contraction in D&O pricing since 2017.

But cyber, another sub-sector, remains a challenge despite signs of stabilisation seen during the quarter as insurers seek to grow their business. Marsh says ransomware continued to dominate the claims environment.

“In the recent months we have seen a plateauing in cyber pricing and an increase in available market capacity,” Mr Donnelly said.

“Clearly the publicity of recent events will have an impact but perhaps in a more positive way in that more companies will consider buying cyber insurance thereby increasing the size of the market premium pool.”

He says an increase in the size of the marketplace will assist in creating stability in pricing and capacity.

Pricing for financial and professional lines, one of three main classes tracked by the index, increased 4% after a 6% rise in the prior quarter.

In the property line, pricing growth slowed marginally to 4% from 5% in the June quarter.

Mr Donnelly says the recent flood losses are having an impact on the market but, broadly speaking, the focus is on those clients who produced losses to the market.

“The scrutiny on catastrophe exposed accounts will intensify in Q4 and into 2023. Inflation and the cost and availability of reinsurance will be major issues for the market in the near term,” he said.

In the casualty line, pricing growth moderated to 10% from 11% in the June quarter.