Brought to you by:
Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Commercial pricing powers ahead in latest quarter

Facebook Twitter LinkedIn Google

Australia and New Zealand commercial pricing gains have accelerated in the second quarter, outpacing global increases, as property, financial and professional indemnity rates rose, Marsh says.

Pricing in the Pacific region jumped 18.3% overall, after gaining 16.1% in the two previous quarters, while global pricing gains accelerated to 5.8% from a pace of 3% in the first three months of the year.

Property clients in Australia and New Zealand generally saw double-digit increases, with pricing up 10-20% in many cases.

“In addition to high hazard business, real estate, mining and downstream energy were more challenging in the quarter, with reduced capacity and appetite from major insurers,” the report says.

Pacific casualty pricing increased by almost 6%, while financial and professional liability pricing rose nearly 28%, marking eight straight quarters of double-digit increases and an accelerating trend.

Price gains for financial and professional indemnity made a major move up a year ago when they jumped from 15% to 23.3% in the second quarter and have held above 20% ever since.

Class actions remain a major risk for listed companies, driving increases of 100% or more for some directors’ and officers’ cover in the latest period, Marsh says.

Financial services professional indemnity experienced increases of a similar magnitude, driven in large part by claims arising from the Hayne royal commission.

“The claims environment has led a number of major insurers to retreat from the marketplace, with others taking much firmer positions on price, capacity and retentions,” Marsh says.

“Much Australian business is placed into the London market, where similarly challenging conditions were evident, resulting from the claims environment, and more broadly, the impact of the Lloyd’s syndicate review and the resultant contraction in capacity.”

The global gain in pricing was the largest increase since the survey began in 2012 and was boosted by an 8% increase for property risks and almost 10% gains in financial and professional lines.

The US gained 5%, the UK 6% and Asia 4%, while the laggards were Continental Europe with a 2% gain and Latin America and the Caribbean which edged up 1%.

“Although global pricing has now increased every quarter for nearly two years, market capacity remains stable in most products and geographies,” Marsh President Dean Klisura said.

The Marsh Global Insurance Market Index measures commercial pricing changes at renewal and covers nearly 90% of Marsh’s premiums.