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Cat-affected property risks defy moderating market

Property renewals for insurance buyers exposed to catastrophe risk have remained a market pain point, but more generally the moderating trend of the past two years is continuing with capacity improving in some areas, the latest Marsh report shows.

Pacific pricing increased 8% for property in the March period compared to 4% gains in the previous two quarters, with loss impacted and catastrophe-exposed clients seeing the highest increases.

Marsh Head of Global Placement Asia Pacific John Donnelly says the property jump doesn’t reflect a wider trend across the market, and there have also been some positive signs recently.

“It looks significant, but it is the average of the portfolio, and it is really because of catastrophe,” he tells “The increases in catastrophe zones are quite substantial and that is what moved the average up.”

The Global Insurance Market Index tracks renewal business each quarter. In Australia, the first three months of the year are the quietest, while the period was also affected by challenging January 1 reinsurance renewals, which created some nervousness around potential implications for policyholders.

“We were unsure how the market was going to react, and what we are seeing is it is acting in a sensible way, and it is not causing the problems it possibly could have,” Mr Donnelly says. “We are far more confident about the rest of the year’s pricing than we were three months ago.”

Australia makes up about 80% of business renewals tracked by the index for the Pacific region, but New Zealand’s influence will be closely watched looking ahead following the impacts of the Auckland flooding and Cyclone Gabrielle.

“The rates in New Zealand are going up more significantly than they are in Australia,” Mr Donnelly says. “They haven’t had much business renew in the first quarter in New Zealand, but it is starting to come through now.”

In other classes of business, casualty pricing rose 10%, the same as in the prior two quarters. Directors’ and officers’ pricing continues to improve for Pacific buyers, with most renewals seeing reductions of at least 5-10% amid increased capacity and competition.

Cyber increases are still at high levels, but have decelerated in a reflection of increased capacity drawn into the market following past increases. The easing has taken place despite a focus on the risks highlighted by some high-profile Australian breaches.

Pricing rose 25% in the March quarter compared to 28% in the prior period, and the signs remain positive for further market moderation. Mr Donnelly says the trend is continuing even more strongly this quarter compared to the previous three months.

Some similar market trends are being experienced in the US, where cyber has moderated significantly, while property increased 17% compared to 11% in the fourth quarter.

“There is a bit of a bifurcation in the marketplace,” US and Canada Placement Leader Chris Lang says. “Clients who have cat-exposed properties are seeing significant rate increases and those that are not cat exposed and have good risk mitigation techniques are actually seeing reasonably moderate price increases.”

Secondary perils that are less well modelled, such as wildfire, inland flooding and severe convective storms, continue to be a focal point in the US, with insurers limiting capacity or seeking increased deductibles.

Globally, commercial insurance pricing rose 4% in the first quarter, the same as in the prior period, with property increasing 10% and casualty 3%, while financial and professional lines decreased 5.

The latest figures mark the 22nd consecutive quarter in which global composite pricing rose, continuing the longest run of increases since the index started in 2012. But the pace of gain has eased substantially since global increases peaked at 22% in the fourth quarter of 2020.

Mr Donnelly says for clients in this region the message is often that that there is “better news”, with tapering gains, rather than good news with decreases, but the supply demand dynamics are looking positive for further moderation.

“The main thing for most of the major classes of insurance is that capacity levels from insurers have held up despite the fact that reinsurance was difficult,” he says.

The report is available here.