Commercial insurance rates declined, on average, for the seventeenth consecutive quarter in Q2 2017, driven by excess capacity and intense competition, according to the latest Marsh Insurance Market Index.
Moderating renewal rate declines in the global commercial insurance market occurred in Q2 for the sixth consecutive quarter, declining, on average, across property, casualty, and financial and professional lines.
Global property insurance rates declined on average by 2.8% in Q2, compared to a 3.6% decline in the first quarter, while financial and professional lines declined by 2.1%, compared to 2.6% in Q1.
In international casualty business lines, according to Marsh, the rate of decline accelerated when compared with the previous quarter, driven by the decline in U.S. casualty pricing.
Global casualty underwriting business saw rate declines of 1.7%, so slightly higher than the first quarters 0.6%, which Marsh said was driven by the U.S.
According to Marsh the only region to show an increase in average pricing was the Pacific.
The high competition seen in the space saw the sector produce a combined ratio of more than 100% at the end of 2016, the first time this is happened since 2012. Citing A.M. Best data, Marsh explains that in Q1 2017 the industry’s combined ratio fell just below 100%.
For the U.S., the composite insurance rate decline was steeper than the overall global rate, explains Marsh. U.S. cyber rates declined by 1.5% on average in the second-quarter, the second time in a row this happened.
“One contributing factor to the rate movement for cyber is the increase in capacity due to the expansion of risk appetite from existing cyber markets, and the entrance of new insurers into this product area,” explains Marsh.
The UK commercial arena remains highly competitive according to Marsh, and rates here also declined, on average, at a higher rate than the overall global rate of decline.
“Renewal rates declined in the UK across all major product lines, although the average rate of decline moderated in casualty from 4.2% to 1.7%,” states Marsh.
While in Continental Europe commercial rates declines were only slightly above the global average rate of decline. In Latin America rate decreases were below the global composite average in the second-quarter, and in Asia, rate decreases remained greater than the global composite average.
In the Pacific the story is slightly different, with commercial insurance rates increasing, on average, by 6.3%. This marks the second quarter running rates have increased in the region, on average, a first since 2013.
The commercial insurance market clearly remains very challenging and ample capacity and high competition resulted in the industry recording a combined ratio above 100% for the first time in a few years. With the environment expected to persist, it will be interesting to see how companies navigate the testing waters.