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Insurance Costs on the Upswing, But Rate Hikes Cool Down

FINANCEInsurance Costs on the Upswing, But Rate Hikes Cool Down

Insurance rates around the world increased by 2% in the fourth quarter of 2023 (down from 3% in Q3 2023), according to a recent report by the Global Insurance Market Index. This marks the 25th consecutive quarter that rates have increased.

Insurance rates in the fourth quarter were generally at similar levels in almost all regions. As was the case in Q3 and Q2, this was largely due to a continued downward trend in financial and professional lines and a small decrease in rates in the cyber insurance market. The results of the quarter were also influenced by a moderate increase in rates for property risks, although increased competition offset the impact of strong demand and reported losses.

Insurance rates remained stable in the United Kingdom, Canada, Asia and the Pacific region. Insurance prices increased by 3% in the United States, 4% in Europe, India, the Middle East, and Africa, and by 8% in Latin America and the Caribbean.

Key findings:

  • Global property insurance prices increased by an average of 6% in the fourth quarter of 2023 (a slight decrease compared to 7% in Q3), while liability insurance rates rose by 3% (maintaining the level of the previous four quarters).
  • For the sixth consecutive quarter, we have observed a decline in prices in financial and professional lines. As a result of further reductions and increased competition for customers, particularly in the United States, the United Kingdom, and the Pacific region, insurance prices fell by an average of 6% in Q4 2023, similar to the previous quarter.
  • Global cyber insurance policy prices fell by 3% (continuing the downward trend – 2% in Q3). This is only the second quarter in which a price decline has been recorded since 2018.
  • Insurers in most regions continue to fear the impact of inflation on the value of assets and the cost of claims when renewing policies.

Pat Donnelly, President of Marsh Specialty and Global Placement at Marsh, comments on the report’s findings:

“In times of prevailing economic uncertainty around the world, clients will certainly appreciate greater stability in insurance rates, particularly in property lines, and increasing competition from insurers in the case of well-managed risks. 2024 is set to be a year of significant geopolitical and economic challenges, so we work closely with clients to develop solutions that will increase resilience to global events and take advantage of improving market conditions.”

Marta Buda, Director of Customer Service at Marsh Polska:

“According to the report, the last quarter of 2023 was another that joined the series of rising prices. The pace of recent changes, however, has been characterized by significantly greater stability compared to earlier periods. Since the beginning of 2021, price increases have fluctuated between 5% and 8%, which allows those seeking insurance protection to look with some hope towards the future. At present, however, obtaining insurance protection in the field of property insurance for some industries or premises remains a challenge, and the greater interest of insurance markets generally applies to well-managed risks, particularly in the area of business continuity.”

Blanka Kuzdro-Chodor, Director of Corporate Client Service at Marsh Polska adds:

“In 4Q 2023 we noted a slowdown in the growth of property insurance rates, which we experienced in previous quarters. This trend should continue in the coming quarters of 2024. An ongoing problem is the lack of sufficient market capacity.”

Anna Pluta, Leader of the Cyber Risks Team at Marsh Polska:

“The observed price stabilization in cyber insurance in Europe in 4Q2023 is largely due to improvements in the quality of risk control measures used by companies, which has a positive effect on reducing, among other things, attacks related to ransomware software. Additionally, new capacities are appearing in European markets, both in the primary and excess layers. New participants in the insurance market are driving increased competition, which is positively affecting premium levels for the insured. The level of cyber policy prices in continental Europe fell by 5% in 4Q2023 compared to 3Q2023 and this market is responding more favorably to the needs of the insured than insurers in the UK market.”

Marcin Olczak, Director of the Credit Risk Department at Marsh Polska adds:

“The insolvency statistics in Poland are still being driven by problems among SMEs. This is certainly noticeable, due to its scale, by some insurers, but in most policies, there is no significant increase in the loss ratio. Looking at individual contracts and even industries, the increase in losses and declines in turnover declared for insurance would suggest a change in rate trends (i.e. an increase desired by insurers). However, strong competition between insurers avoids this situation. Also, from a commercial credit limit point of view, the market remains stable and predictable. Single exceptions do not change the overall picture of the trade credit insurance market. We are still dealing with an insurers’ market, and forecasts for 2024 remain optimistic, hence it is difficult to identify reasons why this situation should change.”

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