Insureds are in the “driver’s seat” as commercial price rises continue to moderate, global broker Marsh says, as its latest market update shows Australian renewal rates weakened further in the fourth quarter of last year. 

The Global Insurance Market Index shows prices in the Australia-led Pacific market were flat in the December quarter following a 1% increase in the third quarter, 2% in the second and 7% in the first. Australia accounts for about 80% of Pacific business tracked by the index.

“One of the key indicators of a hard market is the lack of available capacity and options for clients,” Head of Global Placement Pacific Scott Eccleston told insuranceNEWS.com.au. “Insureds are probably more likely to be in the driver’s seat rather than insurers [right now].” 

Australian renewal price increases have gradually weakened after peaking at 35% in the fourth quarter of 2020.

Mr Eccleston says there is increased competition among incumbent insurers and new entrants, and that has led to “certainly more favourable buying conditions” for insureds.

US specialty group Markel is one of the new commercial insurers in Australia, launching its operations last year, and US-based Everest Insurance is also looking to grow its business.

Mr Eccleston says more competition means “there’s more options for clients and pricing will continue to reduce”.

The Global Insurance Market Index is Marsh’s proprietary measure of commercial insurance rate changes at renewal.

By business line, it shows property prices were flat in the December quarter, reflecting insurer competition and deployment of more capacity. However, loss-impacted and catastrophe-exposed accounts continued to experience price increases.

In the financial and professional lines class, rates decreased 5%, similar to the decline in the third quarter. The drop reflected falls in directors’ and officers’ (D&O) liability prices, with many clients experiencing decreases of 15% or more, Marsh says.

The broker says competition remained strong for D&O primary and excess layers, from new insurers and legacy carriers alike, and that insurers are monitoring claims trends related to the use of generative artificial intelligence.

Flat cyber rates in the December quarter also contributed to the downward pressure on financial and professional lines prices.

In the casualty class, increases slowed to 4% from 5% in the third quarter. Insurers deployed new capacity and restructured programs, contributing to improved results and increased options for buyers.

Globally, commercial renewal rates increased 2% in the fourth quarter following a 3% rise in the third quarter. Marsh says rates were relatively consistent across almost all regions during the period.