In the property and casualty (P&C) insurance market, rate increases have persisted and reflect elevated losses, low returns, concerns about inflation, and a firming reinsurance market, reported Dan Glaser, President and Chief Executive Officer (CEO) at Marsh McLennan (MMC).
During the broker’s Q4 earnings call, he explained that the Marsh Global Insurance Market Index showed price increases of 13% year-over-year, marking the 17th consecutive quarter of rate increases in the commercial P&C insurance marketplace.
A myriad of forces are supporting continued rate improvements in the primary P&C sector, including the push for higher rates from reinsurers as they look to offset many of the same challenges seen in the primary space.
On reinsurance, Glaser explained that the important January 1st reinsurance renewals “reflected an evolving market,” as capacity was adequate, but reinsurers adjusted their risk appetite and pricing thresholds for certain sectors.
“This was in response to ongoing and emerging challenges such as the frequency and severity of catastrophe losses, climate change, core inflation, social inflation, and underlying rate increases,” said Glaser.
Overall, the Guy Carpenter Global Property Catastrophe Rate-On-Line Index increased 10.8% – the largest increase in 15 years – with non-loss impacted clients being generally flat to up 7%, and loss-impacted up from 10% to over 30%.
Expanding on this, Dean Klisura, CEO of MMC’s reinsurance brokerage, Guy Carpenter, noted that while the Jan 1 reinsurance renewal was very late, overall, placements were very orderly and everything got completed.
“Clearly reinsurers differentiated among individual risks. Pricing has been bifurcated between loss impacted and non-loss impacted accounts,” he said.
Klisura believes that capacity across most lines of business is sufficient, however it is certainly more constrained in the catastrophe property market and the cyber market, particularly the cyber aggregate market and the retrocession market.
On the latter, Klisura explained that, “Those components of the market were clearly challenging at 1/1. I mentioned cyber aggregates programs; reinsurers definitely pulled back some capacity there around cyber aggregate capacity.
“Just like property catastrophe, capacity was certainly pulled back by key reinsurers, and probably the most challenging part of the market at 1/1 was the retrocession market, where we saw several ILS funds based in Bermuda really kind of pull back.”
“You had investors pulling capital out, redemption, catastrophic losses from climate change and other cat losses impacting their results, so clearly that was the most challenging part of the market on the January 1 renewal,” he added.
Last week, Marsh McLennan reported “one of the finest results” in its history with underlying revenue growth of 10% for both the fourth quarter and full year 2021.
