Record-setting catastrophe losses in 2017 sparked hopes of a bottoming out of the soft market cycle and although re/insurance renewal rates trailed expectations, Q4 2017 saw a reversal of the trend of declining rates as global insurance industry prices increased for the first time in four years, according to Marsh Global Insurance Market Index for Q4 2017.
Average pricing increased by 0.8% in the fourth quarter, compared to a decrease of 1.9% in Q3 2017.
Marsh said commercial insurance prices in the fourth quarter of 2017 increased, on average, for the first time in four-and-a-half years, said Marsh.
These rate hikes were sparked by increased rates for catastrophe loss affected lines; global property insurance pricing increased 3.2% compared to a 2.4% decrease in the previous quarter.
Commenting, Dean Klisura, President, Global Placement and Specialties at Marsh, said; “losses from Hurricanes Harvey, Irma, and Maria, and wildfires in California drove increases in property pricing in the U.S.
“Although property pricing generally increased, market capacity remains abundant. Pricing in all global regions showed either a moderate increase in the fourth quarter, or a slowing of the pace of decrease.”
Reinsurance market business conditions remain highly competitive in 2018, however, higher reinsurance rates will improve profitability levels and help re/insurers navigate some of the difficult market conditions and the impact of recent natural catastrophe losses.
According to Marsh, financial and professional lines pricing increased 0.1% in Q4, in comparison, both financial and professional lines and casualty pricing decreased in Q3 by 1.4% and 1.7%, respectively.
Average casualty pricing declined at a slower rate of 1.5% compared to the previous quarter.
The Q4 2017 reinsurance rates demonstrate that the Q3 catastrophe events were enough to generate some stability in reinsurance pricing, providing a floor to the global reinsurance-pricing decline of the past four years in commercial and financial and professional books of business, and slowing down rate of pricing decline in other lines.
U.S. cyber insurance pricing also increased for the first time since Q4 2016.
Regionally, Marsh noted average pricing increased in the UK, Latin America, and Australia, which had its fourth consecutive quarter of pricing increases. Average pricing decreased in the U.S., Continental Europe, and Asia, albeit at slower rate than what was observed in Q3.
While these reinsurance pricing gains aren’t enough to signal a true market turn in a market that remains flooded with increased competition, Q3 losses were significant enough to begin to swing the pricing pendulum back in the direction of an upwards trend for the first time in four years; pricing in all regions showed either a lessening of the pace of decrease or a moderate increase in the fourth quarter.