Global insurance rates continued to firm in the fourth quarter of 2012, but at a slower rate than in the previous quarter, despite the mounting cost to the insurance industry of Superstorm Sandy. The Marsh Risk Management Global Insurance Index, a composite or weighted average of rate change activity over the preceding four quarters in major lines of insurance business, rose slightly to 101.2 from 100.9 in the third quarter. The index was based at 100.0 in the second quarter of 2012.
Figures also published in Marsh's Global Insurance Market Quarterly Briefing show that the average rate change at renewal was a 1.2% increase in the fourth quarter, compared to the 1.4% seen in the third quarter. While property rates continued to rise, the rate of increase continued to flatten for the second quarter in row. Rates for financial and professional lines continued to rise, with the average renewal showing a 2.2% increase year-on-year.
Financial institutions in the US, Europe, and Australia continued to see rate increases in their liability insurance programs during the fourth quarter, reflecting insurers' concern about the global economic situation and increased regulatory scrutiny.
Dean Klisura, Marsh's US Risk Practices and Specialties leader, said: "While Superstorm Sandy caused some insurers to suffer significant losses, we do not expect it to be a market-changing event. Insurers remain well capitalized with most of them unlikely to reduce their capacity in 2013.
"However, some insurers are increasing their push for rate increases. The proportion of US insureds seeing rate reductions on renewal fell in most lines of business this quarter. US insureds will find it increasingly difficult to secure rate decreases for property insurance in early 2013. This is especially true for those with losses from Sandy. Flat or declining premium rates at renewal typically are likely to be reserved for insureds with favorable loss histories and low catastrophe exposures."