November insurance market update

New figures released by global insurance broker Marsh show that commercial insurance pricing rose on average by 17% across the Pacific region (which is dominated by Australia) in the third quarter of 2021, marking the 15th straight quarter of double-digit increases in the region.

According to Marsh, the Financial and Professional lines market was the worst affected, increasing by 25%. This eclipsed the increases experienced across the Property and Casualty market segments, which rose by an average of 11% and 15%, respectively. While less than ideal, the Q3 results reported by Marsh is further evidence that the substantial premium increases being levied by insurers in recent years have started to ease on some (but not all) key lines of insurance.

Thus far in 2021, average pricing increases across the Pacific region have dropped each quarter, according to Marsh. This suggests that the pricing pendulum has started to swing in favour of the insurance buyer. The upward trajectory of premium increases experienced over the past 24 months appears to have peaked in the fourth quarter of 2020 at 22% and is now trending downwards.

Lucy Clarke, President of Marsh Specialty and Global Placement, said that “while the risk and insurance landscape remain challenging around the world, we expect rates to continue to moderate in most lines”.

However, while the outlook is looking more positive in certain segments of the market, others remain in a state of flux.

Conditions are particularly challenging in the Cyber Liability market at present following a sharp uptick in both the severity and frequency of cyber-attacks on businesses. Cyber criminals are becoming more sophisticated and are taking advantage of the remote working conditions emanating from the ongoing Covid-19 pandemic.

According to Marsh, Cyber Liability prices increased by 96% in the U.S. in Q3 this year, up from 56% in the previous quarter. Results coming out of the UK were just as alarming, where prices increased on average by 73% in Q3 (up from 35% in Q2). Marsh attribute these increases to a surge in ransomware attacks and acts of cyber extortion, in the main.

This is supported by recent findings published by Cognyte – a global security analytics software firm – which showed that the number of ransomware attacks coming out of the U.S nearly doubled in the first half of 2021 in comparison to the entirety of 2020.

While Marsh’s Q3 figures provide for a more positive outlook, there are still a number of factors that continue to affect the cost and availability of insurance. Insurers are dealing with changing conditions around reinsurance renewals, poor investment returns, and high loss ratios; among other issues.

Organisations operating in high-hazard industries, or those with high claims frequencies or sizeable natural catastrophe exposures will continue to be heavily scrutinised by insurers and will likely be forced to accept further rating increases when renewing their insurances. Insurers also remain very focused on coverage and continue to introduce infectious disease and cyber exclusions across the board in response to both the ongoing COVID -19 crisis and escalating loss activity stemming from cyber-related attacks.

Overall, while there have been some signs of improvement, insurance buyers will still be forced to deal with various challenges come renewal time. Insurers are likely to remain incredibly conservative and will continue to be highly vigilant when deploying their capacity.

For businesses, this creates additional complexity around getting the right insurance at the right cost and is why the performance of your insurance broker is so important. As your representative in the marketplace, their ability to properly leverage your interests with insurers is now more important than ever.

Our specialist services provide you with a comprehensive assessment of your existing insurance arrangements to ensure you enjoy the best the market has to offer. Learn more.

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Josh Tobin

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