Global Rate Changes 2018

23 April 2019

This report, produced by the JLT Insight team, has used JLT broker feedback to chart the global rate changes between 2017 and 2018 across Asia, Australia and the United States.

Global rate changes 2018 bg

Through detailed and wide ranging in-country interviews with business heads, placement leaders and brokers we look to deliver a view of underlying regional rate change, down to line of business level, providing insights on trends of particular interest.

The table below provides a summary of the rate movements indicated during our interviews – from which we have identified 4 areas of particular interest; Australian Property, US Cyber, Asian Cyber and Australian D&O.

Rate overview segmented by lob and territory

summary table final

Cyber: US

US-Cyber

bulletINsight:

Global cyber premium was estimated at $4.5bn for 2017 however Reuters predict that this could reach $17.5bn by 2023.

Cyber premium at Lloyds has seen a combined annual growth rate of 66% between 2013 and 2017.

The US saw a significant decrease in rate throughout 2018 in stark comparison to a flat Australian market and a modest hardening in the Asian market.

This rate softening in the US appears to be driven by a combination of over capacity, competition and insurer profitability all symptomatic of a buyers’ market.

“Crowded market?”: The ratings agency Fitch identified 75 US insurers writing in excess of $1 million each in annual cyber premiums in 2017.

The standalone cyber direct written premium grew by 7% whilst the direct loss ratio fell to 35, down from 43 the previous year. 

Cyber: ASIA

ASIA-Cyber-deep-dive

bulletINsight:

Cyber capacity has continued to increase with new markets in Asia reportedly providing limits of up to $500 million per risk.

Asia on the other hand hardened in Q3 and Q4.

Although feedback suggests an increased rate on larger more complex clients in Hong Kong & Malaysia, the Philippines experienced a 900% increase on the previous year in both Q3 and Q4.

This may be due to an increased awareness of cyber exposure in the Philippines. 

A recent study commissioned by Microsoft (Frost & Sullivan report) suggested that cyber incidents in the Philippines could cause a potential economic loss of $ 3.5 billion accounting for 1.1% of the Philippines’ total GDP of US$305 billion.

D&O: Australia 

Australian DO final

bulletINsight:

IMF Bentham was the world’s first publicly listed litigation funder (ASX: IMF) in 2001 and held an estimated 69% of the market in 2015.

It is now estimated that 25 litigation funders are active in the Australian market.

Australia saw significant D&O rate increases throughout 2018.

Although traditionally a benign market (with a low correlated premium) these rate increases are associated with a huge rise in ‘side c’ claims.

These side c claims primarily arise from a recent fund strategy in Australia known as ‘litigation funders’ which provide legal costs in exchange for a percentage of the win/settlement fee.

In light of this the majority of companies settle to avoid a potentially bigger loss should they lose (publicity too).

This has since become a recognised and successful fund strategy with some losses rumoured to be in excess of 400% of gross written premium and it is these losses which subsequently spilled out into the rest of the market.

General Property: Australia

General Property - AustraliaDomestic insurers have historically made insufficient or no profit in property lines.

The increases seen across 2018 were principally triggered by QBE driven primarily by SME and Hard to place/EPS business: Rate increases in the corporate space have been single digit.

In addition to rate increases, line sizes have shrunk and appetite restricted with certain high hazard classes almost uninsurable.

Amongst these wind exposed and non mainland risks are especially struggling to find capacity.

Despite sustained rate increases over a period of time the market shows no signs of slowing and it is our belief that this market will remain with us throughout 2019.

Sources: 

  • JLT Business leaders and practitioners by territory
  • 3rd party research (please see bibliography)

Asia Hub: 

  • Singapore, Hong Kong, Malaysia, Thailand, Indonesia, Philippines, Japan, Korea, China

Line of business: 

  • JLT divisions by territory

Rate change: 

  • % change by Quarter based on rates for the same Quarter a year prior

Bibliography

Orbis Research
Microsoft
Fitch Ratings
Reuters
Frost & Sullivan Report
The Law reviews – litigation funding edition II

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