Insurers Look to Cyber, M&A Coverage as Prices Decline: Marsh

Commercial insurance rates continued their global decline in the second quarter of 2015, a trend driven by an abundance of global capacity and a lack of large insured loss activity, Marsh said in its latest Global Insurance Market Quarterly Briefing.

At the same time, property/casualty insurers are looking to specialty coverages including cyber and transactional risk insurance for mergers and acquisitions (M&A) as a way to grow, the report says.

As of Q2, there have been nine consecutive quarters of overall rate declines.

Globally, natural catastrophe losses are at historic lows, which is helping profitability but also reducing the drive for rate increases, according to Marsh.

Pricing

Marsh said the Asia-Pacific region saw the largest overall rate decreases, followed by the U.K., Continental Europe, Latin America and then the U.S.

Commercial casualty rates dipped at a more moderate rate than property, ranging from flat to a 5 percent decline dependent on the market. Property insurance dipped more than 5 percent on average, Marsh said.

The Asia-Pacific region saw renewal rate declines greater than 7.5 percent on average. In Continental Europe, the average declines ranged from 5 percent to 7.5 percent, with the U.K. coming in at slightly worse averages. In Latin America and the Caribbean, rate declines varied on average from 2.5 percent to 5 percent. The U.S. saw the least declines, with renewal rates staying flat or dipping to 2.5 percent on average.

Specialized Coverages

One exception to the price declines — specialized coverages — is led by a cyber insurance market that continues to firm up, Marsh reports.

Another bright spot: transactional risk insurance, particularly for M&A deals. Demand for the specialty coverage continued to grow through the first six months of 2015, jumping by 15 percent overall compared to the same period last year in terms of limits placed by Marsh.

“The demand for transactional risk insurance on M&A transactions continues to grow rapidly, as competition among acquirers continues to remain intense,” says Karen Beldy Torborg, global practice leader for Marsh’s private equity and M&A sales practice. Dealmakers in the private equity and corporate space are “increasingly using insurance capital to get deals over the line, and we don’t see this trend subsiding anytime soon.”

In Europe, real estate deals are driving the demand for transactional insurance and U.S. and Asia-Pacific corporations involved in buying and selling are buying it.