U.S. commercial property insurance rates could start accelerating again in coming quarters as insurers absorb the costs of higher reinsurance pricing and capacity reductions continue, according to the broker Marsh.
In its latest quarterly analysis of commercial insurance rates, Marsh notes that catastrophic property insurance continues to be one of the biggest areas of increase globally.
But, overall, the commercial real estate rate environment is currently decelerating, which means that real estate rates are one of the main factors holding back this deceleration somewhat.
Globally, commercial insurance rates increased 9% in the second quarter of 2022, compared to an 11% increase in the first quarter.
Rates have either slowed or stagnated every quarter since the fourth quarter of 2020, but the second quarter of 2022 was the nineteenth consecutive quarter in which composite prices rose, continuing the longest streak of increases since the creation of the Marsh index in 2012.
Global commercial property insurance rates increased by 6% in the second quarter of 2022, compared to 7% in the first quarter and continuing a decelerating trend.
But, although this deceleration has also continued since the second half of 2020, catastrophe property insurance remains one of the strongest segments of the commercial insurance market globally.
In the key U.S. insurance market, property and casualty insurance rates rose 6% in the second quarter of 2022, but Marsh noted that “rate increases may accelerate in future quarters, due difficult reinsurance market conditions and reduced capacity”.
In addition, excess real estate carriers have increased U.S. property insurance attachment points, putting pressure on buffer layers, Marsh noted.
While clients who suffered large losses or were exposed to secondary catastrophe risks generally experienced higher than average rate increases.
Insurers are increasingly focusing on secondary catastrophe risks, including wildfires, convective storms and rain floods, Marsh said, and the property insurance market has deteriorated for heavily insureds. exposed to wildfires, the broker said.
There is also a focus on inflation, with valuation becoming a growing concern for carriers as they seek to ensure they are valuing properties at their true value.
In the UK, market valuations are also a concern given inflationary factors, but catastrophe losses have been lower, which is less of a factor.
Nevertheless, reinsurance pricing is expected to be a future driver of property insurance, and this will likely be a global trend as catastrophe reinsurance rates have firmed up virtually everywhere.
Housing rates also rose again in Continental Europe, Asia and the Pacific, although a deceleration or flattening was evident in every region.
Rates seem unlikely to drop in any part of the world at this time as property insurers face higher reinsurance costs, inflation and other claims-inflating factors. such as supply chain issues and rising labor costs.