Thursday, 16 March 2023 19:48

Higher insurance premiums due to risks and uncertainty

Written by Evelyn Alas

Global commercial insurance prices increased 4% in Q4 2022 (versus a 6% increase in Q3 and a 9% increase in Q2), according to the Global Insurance Market Index published by Marsh, a global insurance and risk broker.

While this is the 21st consecutive quarter of increases, price increases moderated in most regions, with the exception of financial and professional lines, which declined for the second time since the third quarter of 2017.

We can see a price advance of 1.3% as a composite index. "We have a small market in Argentina with appetite for solutions in financial products. Stable in terms of price and conditions for Directors and Managers Liability coverage for small/medium local companies; but very complicated when the company is listed in USA, with no local market for this solution, with the need for facultative placement and difficulty to fulfill all layers", explained in this regard Sergio Aboy Director, Placement Leader Argentina & Uruguay at Marsh.

Regarding the general situation, Aboy points out: "We can see a stable market, with some increases in premiums. In reinsurance we see low capacity and certain restrictions in risks that present inconveniences to export premiums to reinsurers, due to the macroeconomic situation of the country".

In the case of Latin America and the Caribbean, prices rose 7%, up from 5% in the third quarter. Other findings for the region include:

Property-casualty insurance prices rose 6%, up from 5% in the previous quarter; it was the 17th consecutive quarter of increase.

Strikes, riots and civil commotion (SRCC) and sabotage and terrorism (S&T) continued to be a challenge due to political uncertainty in the region.

Liability insurance prices increased 8%, compared to 6% in the previous quarter.

Financial and professional lines (FINPRO) pricing increased 8%, compared to 6% in the previous quarter, marking the third consecutive quarter of single-digit increases.

D&O (Directors & Officers Liability) insurance saw new capacity enter the market, as well as an openness on the part of insurers to review exposed risks, competitive rates and increased appetite.

Globally, cyber insurance pricing increased 28% in Q4 2022, compared to a 53% increase in Q3. In Latin America, they increased 33% in the fourth quarter, a lower rate of increase than seen for several quarters.

Industries facing significant increases in cyber insurance pricing included: financial institutions, manufacturing and technology.

Concerns about the impact of inflation on asset values and claims costs continued to be a focus for insurers at renewal in most regions.

Commenting on the report, Ernesto Diaz, Placement Leader for Marsh Latin America said, "After a challenging 2022, our clients will continue to face a difficult operating environment in 2023. With a slowdown in the global economy, in addition to continued inflation and geopolitical tensions, many clients face significant headwinds.

"Physical property risk pricing continues to be impacted by the high level of losses in 2022 globally, especially as a result of Hurricane Ian. We are working with our clients to examine a wide range of options, including the increased use of captives and risk transfer alternatives, to address their needs and get the optimal outcome for them from the market".

 

Translated by: A.M