Broker Marsh expects market conditions in Australia to favour commercial insurance buyers after rates fell for the first time since 2016.

The Marsh Global Insurance Market Index, released last week, shows rates in the Pacific market, where Australia makes up about 80% of renewals tracked, declined 2% in the first quarter.

“We see a continuation of improved buying conditions. What we have seen in the past few quarters and what we’re seeing in international markets, I cannot see any change in the trend,” Marsh Head of Global Placement Pacific Scott Eccleston told insuranceNEWS.com.au.

“We expect the first half of this year to be improving … and that’s on the back of improved underwriting performance from insurers, very few natural catastrophe events, and just general change in attitude from insurers going into growth mode.”

Australian commercial rates last declined in the fourth quarter of 2016, by 2%. After that they slowly hardened, peaking at 35% growth in the fourth quarter of 2020, before gradually easing as insurers’ risk appetites improved. Rates were flat in the December quarter after a 1% rise in the prior quarter.

Marsh says price drops in the Pacific market were driven by a 10% contraction in financial and professional lines, double the 5% decrease in the previous quarter.

Within financial and professional lines, directors’ and officers’ (D&O) liability rates continued to decline during the first quarter.

In property, rates were flat for the second straight quarter following 26 quarters of increases, while casualty price rises eased for the fourth straight quarter.

“The D&O market is so competitive now that it’s driving the [Pacific] composite rate, so I’m not surprised that we are now in decreases in the composite rate,” Mr Eccleston said.

He says D&O insurers have achieved rate adequacy and retentions have gone up significantly.

“We have also seen a lot more new entrants, particularly out of London, wanting to write that class of insurance. Obviously, where there is more competition it creates cheaper pricing, and that’s what is driving it.”

The quarterly index is the global broker’s proprietary measure of commercial insurance rate change at renewal.

Globally, commercial prices rose 1% in the January-March period after a 2% increase in the December quarter.

From Insurance News magazine: Lloyd’s Chris Mackinnon on the market’s turnaround, challenges in a volatile world, and why insurance is part of his DNA