Insurance prices inch higher in Q3 - Marsh

LONDON Fri Oct 5, 2012 10:37am EDT

LONDON Oct 5 (Reuters) - Insurance prices barely rose in the three months to September as abundant supplies of capital allowed insurers to compete aggressively even after paying out near-record natural disaster claims last year.

The cost of insurance edged up by 0.9 percent during the third quarter compared with the previous three-month period, insurance broker Marsh said in a survey published Friday.

The Marsh survey tallies with others showing that average prices have risen only moderately despite insured losses of $116 billion in 2011. Last year was the industry's second-costliest for natural disasters because of Japan's Tohoku earthquake and Thailand's worst floods in a half a century.

Historically, insurance prices have jumped sharply in the wake of big payouts by the industry as less well-funded insurers retrench, freeing those still in the market to charge more.

Analysts say the subdued price reaction this year reflects plentiful supplies of capital as investors fleeing depressed bond and equity markets put money into insurance instead, often by buying insurance-linked securities such as catastrophe bonds.

Insurance prices began rising in response to last year's catastrophe claims in September 2011, having previously declined or stagnated for about three years amid intense competition.

Companies renewing their insurance during the third quarter had to pay 1.4 percent more than a year earlier, Marsh said.

The broker said the cost of insuring property against natural catastrophes rose, but could fall back again amid a lack of major disasters so far this year.

Marsh also said banks were having to pay more for liability insurance, reflecting worries over the impact of the euro zone sovereign debt crisis.