Global commercial insurance rates continued their descent in the fourth quarter of , marking the sixth consecutive quarterly decrease after a seven-year period of increases. The trend, detailed in the Global Insurance Market Index published by Marsh Risk, signals a softening market driven by increased capacity and competitive pressures among insurers.
Overall rates declined by 4% in Q4 , according to the report. This follows a 4% decline in Q3 , a 8% decline in Q2 , and a 1% decline in Q1 . The current period of declines represents a significant shift from the preceding years, where rate increases were the norm.
Property Insurance Leads the Decline
The most pronounced rate decreases were observed in property insurance. Globally, property rates fell by 9% in Q4 . The Pacific region experienced the steepest drop, with rates declining by 12%. The India, Middle East, and Africa (IMEA) region saw average rate decreases of 10%. The United States and Latin America and the Caribbean both saw declines of 9%, while other regions experienced decreases ranging from 3% to 7%.
This easing of property rates is attributed to several factors, including growing competition among insurers, a favorable loss environment, and more attractive reinsurance pricing. Lower reinsurance costs, in particular, have allowed insurers to offer more competitive premiums.
Casualty Rates Buck the Trend
While property rates are falling, casualty rates present a different picture. In the United States, casualty rates increased by 9% in Q4 , up from 8% in Q3 . Excluding workers’ compensation, the increase was even more significant, reaching 12%.
This divergence suggests that the softening market conditions are not uniform across all lines of insurance. Casualty risks continue to present challenges, potentially due to factors such as social inflation and increasing litigation costs. The US is an outlier, with all other global regions experiencing year-over-year composite rate decreases in Q4 .
Financial and Professional Lines Also See Decreases
Beyond property, other lines of insurance also experienced rate declines. Financial and professional lines rates decreased by 5% globally, with decreases observed in every region. Reductions in this sector have been consistent, with mid-single-digit declines occurring in 12 of the past 13 quarters.
Cyber insurance rates also fell, decreasing by 6% globally. Europe saw a particularly sharp decline of 12%, while Latin America and the Caribbean, and the United Kingdom both experienced 11% decreases.
Implications for Clients and Insurers
The overall trend of declining rates is positive for insurance buyers, offering opportunities to negotiate improved terms and conditions. John Donnelly, president of Global Placement at Marsh, noted that clients continue to benefit not only from declining rates but also from opportunities to negotiate improved terms and conditions
. He anticipates that competition among insurers will continue to intensify.
However, the increase in US casualty rates serves as a reminder that not all risks are becoming cheaper to insure. Insurers are likely to remain selective in underwriting casualty risks, and clients may face higher premiums for coverage in this area. The report notes that Marsh’s Global Insurance Market Index tends to focus on larger account business, and the trends observed may not be fully representative of the small and medium-sized enterprise (SME) market.
The continued decline in rates, coupled with increased capacity, suggests that the insurance market is entering a soft cycle. This environment is expected to persist as long as favorable loss conditions and competitive pressures remain in place. The impact of lower reinsurance costs will be a key factor in determining the duration and extent of this soft market.
Looking ahead, insurers will likely focus on maintaining profitability through underwriting discipline and expense management, even as they compete for market share. Clients, will be well-positioned to leverage the softening market to secure more favorable insurance arrangements.
