According to John Doyle, president and chief executive officer of Marsh McLennan Cos, the most challenging January reinsurance renewals in nearly two decades saw the global real estate catastrophe rate rise 25% to 60%, with loss-stricken customers seeing even higher prices. .
“The real estate cat reinsurance market was under pressure with significantly rising prices and confirmation points, due to several years of higher-than-expected cat losses, macroeconomic factors and supply and demand imbalances,” he said during an analyst call to start the fourth quarter. discuss and annual income.
“In the U.S., increases in real estate cat reinsurance rates were the highest in 17 years, generally in the 40% to 60% range,” said Doyle, who became president and CEO of MMC on Jan. 1.
He said ceded premiums were in most cases tempered by higher retention rates, or disaster programs tied at higher levels.
“Attachment points were up significantly for many of our clients, not just in the United States, but across all regions with the cat extensions on Jan. 1, so our clients were forced to take on more risk, more volatility on their balance sheets,” said Dean Klisura, president and CEO of Guy Carpenter, Marsh McLennan’s reinsurance division.
January renewals see the toughest real estate catastrophe reinsurance rates in generation
While many in the industry had expected inflation to boost demand for additional limit, that didn’t materialize during the extensions, Klisura noted. “Customers mostly bought the same amount of cat limit as they did last year,” he said, explaining that it was prohibitively expensive for many customers given the rate increases in property cat and very challenging terms.
Meanwhile, average commercial property/casualty insurance prices continue to rise in many lines and regions, Doyle said. “While the pace of price increases has continued to moderate after 21 consecutive quarters, the tight reinsurance market could have knock-on effects, particularly on property insurance rates.”
Commenting on trends in the insurance market, Martin South, President and CEO of Marsh, said, “We’re in the 21st quarter with rate increases of about 4%, which is tough for our customers, and that will obviously impact their behavior. The number casualties level off [3%] and real estate accelerated slightly to 7% in the last quarter.”
He predicted that trend will continue into the first quarter of next year as insurers absorb the cost of high cat losses and reinsurance costs.
Overall, average rates for directors and officers fell about 6%, which South attributed to less activity from Special Purpose Acquisition Companies (SPACs), which typically had higher ratings, and new entrants to the D&O insurance market. “Globally, about 20 new carriers entered the market, committed capital, which allowed some of our customers to increase their limits and seize opportunities they saw in that market.”
Moving on to the cyber market, South said rates continued to rise with rate increases of 28%, though that is a slowdown from the previous quarter when there were 53% increases.
Results Q4 and 2022
Marsh McLennan’s fourth quarter operating income was $680 million compared to $986 million in the same period last year. Consolidated revenue was $5.0 billion, down 2% compared to Q4 2021, or up 7% on an underlying basis.
For the full year, operating income was $4.3 billion and adjusted operating income increased 11% to $4.8 billion. Net income attributable to the company was $3.0 billion. Revenue for the year was $20.7 billion, up 5% compared to 2021, or 9% on an underlying basis.
Risk and insurance services
Marsh McLennan’s Risk and Insurance Services (RIS) segment (Marsh and Guy Carpenter) reported fourth quarter operating income of $472 million, compared to $667 million in the same period of 2021, while adjusted operating income increased 23% to $685 million, from $557 million in the same period in 2021.
Revenue for the RIS segment in the fourth quarter was $2.9 billion, down 3%, said Mark McGivney, Chief Financial Officer of Marsh McLennan. “Underlyingly, revenue in RIS was up 8%, the strong performance reflects the momentum in our business and our resilience in the face of macroeconomic headwinds and economic uncertainty.”
For the full year, RIS operating income was $3.1 billion, while adjusted operating income increased 15% to $3.5 billion. Full-year revenue for RIS was $12.6 billion, up 5%, or 9% on an underlying basis.
Breaking down the results by the two RIS units, McGivney said Marsh’s revenue fell 6% to $2.7 billion in the quarter, but was up 6% on an underlying basis. For the full year, sales at Marsh were $10.5 billion, up 3%, or 8% on an underlying basis.
Guy Carpenter’s fourth-quarter revenue was $171 million, up 5% on an underlying basis, McGivney said. For the full year, Carpenter’s revenue was $2 billion, up 8% from a year ago, or 9% on an underlying basis, he added.
“Based on our current outlook, we expect Guy Carpenter’s growth in 2023 to benefit from a tightening reinsurance market,” McGivney noted.
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Trends Reinsurance
