BOSTON (Reuters) - Property insurance rates are on the rise around the world, solidifying a turn in the market after years of declines, insurance brokerage Marsh said on Tuesday.
Just in the United States, customers without significant exposure to natural catastrophes saw price increases of up to 10 percent in the first quarter, while those in disaster-prone areas paid rates up to 20 percent higher than their last contract, the Marsh & McLennan Cos Inc (MMC.N) unit said.
“We believe that this trend will continue in the short term, with the average rate of increase continuing to rise month over month,” Dean Klisura, a Marsh managing director, said in a statement.
Prices are on the rise elsewhere, Marsh added, most sharply in the countries that have had recent natural disasters.
The company cited two main factors for the increase in prices: 2011’s record-setting catastrophe losses (more than $100 billion by most estimates)and changes in the way insurance companies model their exposure to risk.
Insurance rates were in sharp decline in recent years, as most insurers had ample excess capital and competed for business on price. At one point in late 2010, Barclays Capital said rates had fallen back to levels last seen in 2000.
Amid those declines, insurers and investors eagerly awaited the return of what the industry calls a “hard market,” where the companies have pricing power and can raise rates. Last year’s losses appear to have triggered that turnaround.
The recent trend in rising rates has benefited big U.S. property insurers such as Travelers Cos Inc (TRV.N) and Chubb Corp (CB.N) in particular, helping to offset concerns about declining investment returns.
Reporting By Ben Berkowitz; editing by Andre Grenon