Australian composite rates increased 13.6% in the third quarter, while the global composite fell for the 18th consecutive quarter, according to Marsh’s Global Insurance Market Index.

Head of Placement Asia-Pacific John Donnelly told insuranceNEWS.com.au the rate rises follow years of Australia being among the leaders in rate reductions, meaning it “reached the bottom faster than northern hemisphere countries”.

“The sustained period of rate reductions caused insurers’ commercial property insurance results to be strongly in the red, with the 2015 combined operating ratio for the whole Australian market exceeding 130%,” he said. “The price correction that is occurring is a natural attempt to arrest those negative results.” 

An increase of 17.5% recorded in property rates incorporates New Zealand, where rates have been rising significantly in some locations following earthquake activity, he says. The figure for Australia alone is closer to 7%.

The financial lines market in Australia has been affected by side-C directors’ and officers’ claims.

“We are seeing a rapid market response to the increasing number of class action claims, with insurers raising premiums substantially,” Mr Donnelly said. “Many insurers have also reduced their capacity and moved upwards their preferred attachment point.”

Worldwide, the third quarter marked four-and-a-half years of quarterly declines in commercial insurance rates, with the market maintaining significant capacity and competitive underwriting.

However, Mr Donnelly told insuranceNEWS.com.au the tide is turning in the northern hemisphere, with a strong push for rate increases in the fourth quarter and rate reductions having “disappeared”.

Natural disasters in the US and elsewhere had little to no impact on average rates in the quarter because they occurred late in the reporting period.

There are early indications of rate increases for US catastrophe-exposed property risks.