Corporate cover rates decline amid ample capacity

Mumbai: Rates to cover risks such as fire, cyber-security breaches and professional liabilities declined by at least a sixth in the June quarter, data from Marsh India showed, reflecting abundant domestic and overseas capacity that undercut pricing.

Cyber insurance rates fell 25-30%, fire insurance 19%, professional indemnity 20-25% and directors' and officers' liability 15-20%, data showed, underscoring the broader profitability challenges facing the non-life insurance business and risk distribution. "It's a buyer's market. As of now in India, most insurance companies are not worried about profit," said Gaurav Pagare, sales and placement leader, Marsh India. "They are all interested in the top line and for the top line, they do very aggressive underwriting."

The soft market is expected to persist in the near term, with additional reinsurance capacity through GIFT City adding to competition. The decline is not due to an absence of claims, with Marsh seeing large losses across property, casualty and cyber but the surge in capacity, which is outweighing claims pressure and keeping premiums under pressure.


Over two dozen reinsurers have started operating through GIFT City and premium volume has surged 11-fold in 5 years to 1.2 billion.

The competition is also changing the nature of insurance products. Cyber policies, for instance, now offer coverage for risks such as ransomware and business interruption that were previously available only from a limited number of insurers. Cyber sub limits under property policies are also increasingly available.

The soft market has also reduced the incentive for corporates to accept higher deductibles. During the hard market two years ago, companies were willing to take higher deductibles in exchange for premium discounts. With insurers now offering lower deductibles at competitive prices, buyers have little reason to make that trade-off.

Marsh said clients are instead using the favourable pricing environment to increase their limits. While premiums have fallen by around 20-30% in some lines, the increase in limits has been closer to 10%.