Global Insurance Pricing Increases in Third Quarter 2021
Global commercial insurance prices increased 15%, on average, in the third quarter of 2021, the same rate of increase as the second quarter. Pricing increases peaked in the fourth quarter of 2020, at 22%.
It was the sixteenth consecutive quarter of increases in the Marsh Global Insurance Market Index (see Figure 1).
Cyber insurance pricing continued to increase significantly, with price rises of 96% in the U.S. and 73% in the U.K. The increases were driven by the frequency and severity of losses, particularly related to ransomware.
The U.K. and Pacific regions again had the highest average increases, with composite insurance pricing up by 27% and 17%, on average, respectively. Average pricing in the U.S. rose by 14%, up slightly from the 12% year-over-year increase experienced in the prior quarter.
Average pricing increases in Continental Europe (10%) and Latin America and Caribbean (2%) were lower than in the prior quarter; Asia stayed the same (6%).
All three major product lines (property, casualty, financial and professional) showed increases in average pricing globally, though less than the prior quarter for financial and professional lines (32%) and property (9%), while casualty remained the same (6%).
US Insurance Pricing Increases on Cyber, Low Number of Renewals
After slowing for three consecutive quarters, the rate of price increases in the U.S. rose to 14%, from 12% in the second quarter. This was largely due to the increase in cyber insurance pricing as well as the lower number of clients that typically renew their programs in the third quarter.
Average property insurance pricing in the U.S. increased 10% in the quarter compared to 9% in the second quarter. Clients with significant losses, poor risk quality or significant exposure to catastrophe perils experienced above average increases; the market deteriorated for clients heavily exposed to wildfire.
Financial and professional lines pricing in the U.S. increased an average of 27% in the quarter, driven by cyber insurance pricing. Directors and officers liability (D&O) insurance rose an average of 10% in the quarter. This marked a decline from the 15% average in the second quarter, reflecting an increase in capacity from insurers.
Pricing for cyber insurance increased 96% on average, as ransomware events continued to impact the market. Cyber pricing rose throughout the quarter, with the average increase in August at 112%. Ransomware attacks have affected all industries, especially health care, manufacturing, educational institutions and public entities.
Casualty insurance pricing in the U.S. increased 6% on average. Excluding workers’ compensation, the increase was 11%.
UK Pricing Increases Moderating
Overall, insurance pricing in the third quarter of 2021 in the U.K. increased 27%, compared to a 28% increase in the prior quarter. It was the highest average in any region and the sixteenth consecutive quarter of increase.
Financial and professional lines increased 54%, lower than the 57% average increase in the second quarter, driven by cyber pricing. Average D&O rate increases declined significantly, from 121% in the second quarter to 61% in the third, as insurer competition increased.
As elsewhere, cyber insurance rates continued to climb, with some clients seeing triple-digit increases.
In other lines, property insurance pricing increased 11%, on average, and casualty was up by an average of 7%.
Stable Pricing Increases in Asia
Insurance pricing in the third quarter of 2021 in Asia increased 6%, year-over-year, the same as in the prior quarter.
Property insurance pricing rose 5% in the region, on average, while casualty pricing remained generally flat in the quarter, as it has for several years.
Financial and professional lines pricing in the region rose 17%, on average. Cyber insurance remained challenging. Clients faced considerable pressure on pricing and deductibles, along with a marked reduction in capacity and narrowing of key coverages.
Insurance Pricing by Region
Other regional highlights in the third quarter included the following:
Continental Europe experienced a 10% average increase in overall composite insurance pricing. Financial and professional lines pricing increased 14% and property 12%, on average, down from 20% and 18%, respectively, in the prior quarter. Casualty increased 5%, on average, the same as in the second quarter.
In the Latin America and Caribbean region, composite pricing rose 2%, on average, up from 4% in the prior quarter. Casualty pricing declined 3% on average, and was again the only decrease seen in a major product line globally.
In the Pacific region, pricing increased 17% on average, a decline from 23% in the second quarter. Financial and professional lines increased an average of 25%, compared to 37% in the second quarter. Property pricing rose 11% on average and casualty insurance pricing rose 15% on average.